He asks the question, “Is this occurrence a coincidence, or does this simply highlight just how reliant the housing market has become on demand from the investor segment?”
The research results show that over the past five years dwelling values nationally have increased by 39.3 per cent, largely driven by Sydney and Melbourne where values have increased by a much larger amount. Similarly, Mr Kusher noted that over the same period, investors have committed to housing finance commitments totalling $695.6 billion.
In May 2015, investor activity peaked and accounted for 54.8 per cent of new mortgage demand (excluding refinances), which was a historic high. Mr Kusher said, “However, 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?”
To determine this impact, below we take a look at investor housing demand across each state and territory.
- NSW – at their peak in May 2015, investors accounted for 63.6 per cent of new mortgage demand. This fell to 50.3 per cent in September 2017, its lowest proportion since December 2015 and well below its five-year average of 55.6 per cent of new mortgage commitments.
- Vic – investors currently account for 43.2 per cent of new mortgage demand, which is well down from the May 2015 peak of 54.7 per cent and below the five-year average of 46.9 per cent.
- Qld – investor activity peaked all the way back in 2007, when investors comprised 49.3 per cent of mortgage demand. Investors currently account for 34.3 per cent of new mortgage lending, lower than the five-year average of 40.8 per cent.
- SA – investor activity peaked at 47.5 per cent of new mortgage lending in June 2015 and reduced to 36.9 per cent in September 2017. Over the past five years, investors have accounted for an average of 39.8 per cent of new mortgage lending each month.
- WA – investor participation peaked all the way back in December 2008 at 49.8 per cent of new mortgage lending. Over the past five years, investors have averaged 38.1 per cent of new mortgage lending and were recorded at 33.6 per cent in September 2017.
- Tas – over the past five years, investors have averaged 30.3 per cent of new mortgage demand in the state; in September 2017 this figure rose slightly to 33.3 per cent.
- NT – after peaking at 61.5 per cent of new mortgage demand in June 2014, investors slumped to just 34.1 per cent of demand in September 2017, much lower than the five-year average of 49.2 per cent.
- ACT – investors currently account for 38.2 per cent of new mortgage demand, which is lower than the five-year average of 43.0 per cent and much lower than the historic high of 50.4 per cent all the way back in June 2000.
Mr Kusher said, “The results show us that mortgage demand from investors, particularly in NSW, has slowed; so too has 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.
“Investor participation over recent years in Victoria has not been as significant as in NSW. Outside of NSW and Victoria, investors have not been the most significant source of new mortgage housing demand over recent years. We saw a similar slowing of investor demand occur when credit conditions were tightened after the first round of APRA’s macroprudential policy changes through 2015 and early 2016.”
With investor demand continuing to reduce due to tighter credit conditions, low yields and affordability constraints, Mr Kusher believes it is reasonable to expect that this will have the greatest impact on NSW housing markets, followed by those in Victoria.
He said, “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 favorable for owner occupiers.”
Upcoming auctions
This week, all of the busiest suburbs for auctions are in Victoria, with 22 homes scheduled to go under the hammer in Richmond, followed closely by Mount Waverley with 21 auctions, while Essendon and Glen Waverley will both host 20 auctions.
Auction activity is expected to remain relatively steady this week, with 3,066 homes scheduled to go to auction across the combined capital cities. This is an increase of five per cent on last week’s final figures which saw 2,907 auctions held, slightly higher than volumes from one year ago (2,987).
Across the two major auction markets, activity is expected to rise across Melbourne, with 1,563 auctions scheduled this week, increasing from the 1,296 auctions held last week; while Sydney is set to host fewer auctions, with 965 homes currently scheduled for auction, down 12 per cent on the 1,102 held last week.
Across the smaller markets, the number of scheduled auctions has increased in Adelaide, Perth and Tasmania, while there are fewer in Brisbane and Canberra this week.
Summary of last week’s results
The combined capital city final auction clearance rate rose to 62.8 per cent last week across a significantly higher volume of auctions week-on-week (2,907), increasing from 61.5 per cent over the previous week when 2,046 auctions were held. Clearance rates continue to track lower than what was seen one year ago, when over the corresponding week 74.4 per cent of auctions cleared, while volumes were similar a year ago at 2,897.
Across Melbourne, last week saw the final auction clearance rate drop below 70 per cent, recording a 69.2 per cent success rate across a higher volume of auctions over the week (1,296). This is the lowest recorded for the city since July 2016, falling from the 74.3 per cent across 318 auctions over the week prior. The final auction clearance rate recorded a more moderate fall across Sydney last week, with 58.5 per cent of the 1,102 auctions clearing, down from the 59.8 per cent across 1,232 auctions the previous week.
Across the smaller auction markets, performance was mixed last week, with clearance rates improving in Canberra and Perth while Adelaide, Brisbane and Tasmania all saw clearance rates fall. The Gold Coast region was the busiest non-capital city region last week, with 65 auctions; however, Geelong recorded the strongest clearance rate (72.6 per cent).
