Debbie Shankar - 8 Dec, 2016

Investors Rolling Back into the Housing Market

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Investors poured another $32 billion into housing over a month, according to the Australian Bureau of Statistics (ABS). But, the number of dwellings for sale is still low. So, what does this mean for the housing market?

Property Investment Figures

Dwelling finance commitments reached $32,301,000,000 for September, an increase of 2.3% when compared to August data. This figure was also 9.5% higher than September of 2015. Investor spending rose by $12.885 billion over this time. However, owner-occupiers still borrowed slightly more, at just over $19 billion.

Despite strong activity increases, investor finance is still 13.9% lower over the last 9-months, compared to 12-months before. Nevertheless, these changes may show that the market is making a recovery after lending criteria changes.

New South Wales Leads the Way

New South Wales (NSW), Victoria (VIC), and Queensland (QLD) recorded the highest levels of activity. Borrowing increased by more than $7.1 billion in NSW, $5.4 billion in VIC, and by $3.5 billion in QLD.
The draw-card state for investors is NSW with an increase of 8.9% in activity over September. Furthermore, lending in NSW totalled $6.2 billion for dwellings over the month; a 13.7% increase compared to 12-months earlier. Hence, this state tops national investor credit with 48.7% of all residential investment concentrated in this region. Moreover, this figure is now the highest recorded since the investment boom in 2003.

Victoria also recorded strong investment growth during September; recording a total increase of $3.3 billion in investor spending. Consequently, this was a rise of 17.4% when compared to the same time last year. Residential finance in VIC has now reached 47.6%, the highest recorded since July 2015.

Decline in Dwelling Approvals

According to the ABS, the number of dwelling approvals fell during the month of September to 18,945. As a result, figures dropped by 8.7% when compared to August 2016 figures. Data suggests NSW recorded the highest number of dwelling approvals at 6,314, while VIC recorded 5,056 and QLD 3,732.
Nonetheless, while the number of approvals has declined, home values continue to rise. Nationally, dwelling values increased by 29.9% during September.

Rises in Home Prices

With a limited supply of homes in Sydney and Melbourne, property prices are continuing to rise. Thus, these rising home prices are continuing to attract domestic investors nationally as they are the strongest markets. For instance, Sydney recorded a price increase of 3.5% over the quarter and 0.8% over the month. Melbourne, however, recorded a rise of 5% for the quarter, and 2.3% over September. Annually speaking, Sydney property increased by 10% in value and Melbourne’s by 9%.

Therefore, economists suggest that an increase in investor activity will put pressure on dwelling prices.
They say that property investment tax incentives are the primary driver of growth. Although, it is also important to note that not all sectors are the same.

Australian resource centres have taken a hard hit after a decline in mining. Subsequently, Perth home prices have fallen by 7% and Darwin by 6% over the last 12-months. Compared to price peaks, both markets have suffered double-digit declines in home values, Rental prices are also dropping in these markets, and the number of listings is increasing.

Some areas of Western Australia have experienced massive losses. For example, Karratha home values have dropped by as much as 60% since their peak. Average home prices in this region are around $300,000. Port Headland has also seen a 56% drop, with the average home price now around $560,000.
Economists suggest that during 2017 mining area markets will begin to level out. Over this time, the markets will turn, and prices will increase. Rental markets will also start to improve in these sectors.

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