Rates on I/O Loans to Fall
Owner-occupiers are filling the gap left by investors in the property market and house prices on the eastern seaboard will continue to rise, says Mortgage Choice chief executive John Flavell.
Despite a slowdown in investor lending, residential loan approvals remain steadfast at $33 billion on a monthly basis, says ABS data.
Flavell also believes a number of lenders have over-reacted in their repricing of interest-only products as a result of APRA’s crackdown on investor lending and the pendulum would “swing back the other way” in a matter of weeks.
Flavell says most lenders had a comfortable margin between what they were lending and breaching the cap and may drop their rates.
“The consensus view is that house prices across Brisbane, Sydney and Melbourne will grow 4-5% on an annual basis over the next 12-24 months,” he says.
House Demand to Outstrip Supply
Ongoing population growth and constraints on building new homes means housing demand is set to outstrip supply in major cities for the next 40 years, the Committee for Economic Development of Australia report has found.
Research and policy chairman Professor Rodney Maddock says the debate on housing affordability often centred on foreign investment, negative gearing and interest rates, but the issue is far more complex. He says price boom in the biggest cities has been driven primarily by supply and demand issues.
Prolonged housing affordability issues will see some people entering retirement without owning their home and low socio-economic households pushed to outer areas where transport infrastructure is poor and job prospects are lower, he says.
The report calls for a raft of new measures, including the replacement of stamp duty with a land tax, lifting capital gains tax and improved protection for renters.
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Rentvesting Gains Popularity
New research from non-bank lender State Custodians Home Loans has found that 74% of people think rentvesting is a good strategy for those seeking to get into the market.
Both Gen Ys and Australians of all ages say that they’re in favour of rentvesting because it allows people to obtain property, build equity and live where they want to, rather than living in a mortgaged house in an area they’re not keen on.
The key reasons behind the popularity of the strategy are:
- It allows buyers to get into the property market sooner;
- It provides two income streams: rent from tenants and tax benefits;
- Rentvestors can afford the lifestyle they want;
- Rentvestors can live in a high-quality rental home, which would be out of their price range to buy, while earning income from elsewhere; and
- Rentvestors have more disposable income to spend on other things.
Apartment Sales Fall
Sales of new apartments fell by 15.7% in July, while detached home sales rose 0.4%, says Housing Industry Association. The results are in line with the HIA’s expectation that sales will continue to slow for a number of years after peaking in mid-2015.
Detached home sales were up 9.8% in Victoria, compared with declines in South Australia (16.2%), Queensland (16.1%), Western Australia (9.1%) and New South Wales (5.2%).
“Victoria remains the jewel in the crown of Australian home building activity at the moment,” the report said.
The HIA said the fall in sales in WA was linked with the state government’s First Home Buyers grant winding up at the end of June.
Total Australian new home sales in the first seven months of 2017 are down 4.6% compared to the same period in 2016.
Singaporeans Overtake Chinese
Signs are emerging that the capital inflow from China to Australian property is slowing, but is being offset by Singaporean investors.
In the first half of 2017, Chinese investment in Australian real estate fell 69%, compared with the same period last year, while Cushman & Wakefield said the largest source of foreign capital for Australian commercial real estate was from investors in Singapore.
China’s State Council, or cabinet, has banned investment in foreign casinos and defence technology, while overseas property development and hotels are classified as “restricted”. Their aim is to reduce risk to Chinese businesses and its banking system.
According to Cushman & Wakefield, despite lower Chinese investment, Australian commercial real estate is on track for another robust year, with the firm’s research forecasting total investment of around $30 billion for the year.