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Capital cities surprise amid investor slowdown

Capital cities surprise amid investor slowdown

Capital city surprise amid investor slowdown
by Sasha Karen 0 comments

The latest CoreLogic Property Pulse reveals a few surprising insights about Australia’s two most popular capital cities as it explores the influence investors have on their markets.

In the reoccurring report, CoreLogic analyst Cameron Kusher researched the decline of dwelling values and its relation to the dropping level of investor activity.

Over the last five years, dwelling values nationally rose by 39.3 per cent, mostly pushed up by Sydney and Melbourne, while in the same time frame, investors committed finance totalling $695.6 billion towards housing, and during May 2015, investor activity accounted for 54.8 per cent of new mortgage demand nationally.

However, the investor environment has changed since then.

The analyst asked: “With investor demand now slowing, falling a further -6.2 per cent in September 2017 and dwelling values falling in the most investor-centric city (Sydney), what impact is the investor slowdown going to have on the broader housing market?”

In order to determine the impact, Mr Kusher analysed mortgage demand, which saw that in New South Wales and Victoria, investors currently account for 50.3 per cent and 43.2 per cent, respectively, down from their May 2015 peaks of respective 63.6 per cent and 54.7 per cent.

According to Mr Kusher, this shows that when mortgage demand from investors falls, so too does the rate of value growth.

“In fact, Sydney dwelling values are now falling as investor demand continues to fade. Melbourne has also seen value growth slow, although not to the same magnitude as Sydney. However, investor participation over recent years in Vic has not been as significant as in NSW.”

Outside of the two popular states, investors have not been less influential, but for the most part, Mr Kusher said that new mortgage demand by investors has declined.

“We saw a similar slowing of investor demand occur when credit conditions were tightened after the first round of APRA’s macro-prudential policy changes through 2015 and early 2016,” Mr Kusher said.

In these markets, the analyst said that this lack of demand could be beneficial towards owner-occupiers, rather than investors.

“Elsewhere, the changing landscape may slow markets a little, but other states and territories have largely seen demand over recent years driven by owner-occupiers.

“If anything, the lack of value growth in these markets, superior affordability and less demand from investors may make buying conditions slightly more favourable for owner-occupiers.”

The rest of the states and territories and how their investor demand for new mortgages as of September 2017 compared to their five-year average are as follows:

Queensland

  • Currently at 34.3 per cent
  • Under the five-year average of 40.8 per cent

Western Australia

  • Currently at 33.6 per cent
  • Under the five-year average of 38.1 per cent

South Australia

  • Currently at 36.9 per cent
  • Under the five-year average of 39.8 per cent

Tasmania

  • Currently at 33.3 per cent
  • Over the five year-average of 30.3 per cent

Northern Territory

  • Currently at 34.1 per cent
  • Under the five-year average of 49.2 per cent

ACT

  • Currently at 38.2 per cent
  • Under the five-year average of 43 per cent
Capital cities surprise amid investor slowdown
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