Are Investors Really Rushing Back into the Aussie Property Market?
As Australian real estate prices across the country continue to rise at a rapid pace, we’re starting to see the same old headlines getting rolled out about investors rushing back into the market. However, the truth of the matter appears to be a little different.
What we know is that the Australian housing market is most certainly rising. The latest data from CoreLogic shows us that Australian real estate prices increased by 1.8% nationally last month and are 6.8% higher for the quarter.
The most recent figures suggest that May is also looking very strong with combined Australian Capital City real estate prices already 2.0% higher over the month of May in Sydney, Melbourne, Brisbane, Adelaide and Perth. However, the suggestion that houses are being bought up by investors over owner-occupiers is a little misleading.
The mainstream media started pointing out the move back to the market from investors when the March lending data was released by the ABS. The figures pointed to the fact that investor lending grew by 12.7% over that month. While loans to owner-occupiers had increased by just 3.3%.
While there’s no doubt, investors are slowly coming back into the Aussie property market, it’s very clear that the current bull run is predominantly an owner-occupier affair for a number of reasons.
Thanks to COVID, the property landscape around the world changed very quickly. As central banks cut interest rates to near-zero levels, the equation for many owner-occupiers also shifted dramatically.
In many areas, it quickly becomes more affordable to buy rather than rent and that was before the host of both federal and state-based incentives made buying a home even more appealing. First home buyers, were clearly the biggest winners, gifted building bonuses and increased stamp duty exemptions on top of record-low interest repayments.
At the same time, the opportunity for those looking to upgrade their home to something more appropriate for their family also helped boost demand from owner-occupiers. In effect, the incentives combined with the record low-interest rates on offer bought forward demand in a big way and led to a surge in demand for finance.
Similarly, the Australian housing market across the board was still seeing low levels of quality stock, with many still hesitant to list their properties throughout periods of lockdown, which only added more fuel to the fire.
It could also be suggested that the state of the property market has also played a role in where we are today. After the boom in property on the East Coast, Australian real estate prices did weaken after the peak in 2017. We can see what happened to applications for both investor and owner-occupier finance in that period of time as well.
Australian real estate prices and market sentiment was actually increasing at the end of 2019, which coincided with a Liberal victory at the polls and fears of negative gearing being abolished going away.
Even the RBA has made it clear that this is not an investor driven push and suggested that investor lending was actually still low by historical standards.
To put the events in context, we are still likely to see house price growth going forward, but things are not out of control as the media would have you believe. Much of the demand for property from the likes of first home buyers has been bought forward, so we should assume that there will be a reduction in demand from that same demographic going forward.
However, if you’re in the market for a high-quality property in a sought-after location, it’s likely that those properties will continue to see strong demand.
While it’s unlikely that APRA will clamp down on bank lending at this stage, until interest rates rise, buying blue-chip property is still a very appealing proposition.
If you’re expats in UK, USA, Hong Kong, Singapore or other regions and thinking of buying – buy sooner rather than later. The longer you wait, the more you’ll pay. Just don’t buy into all the media headlines when you’re making your buying decisions.