“I’m not too concerned about rate hikes as such,” Inati says.
“It’s more a question of whether the market is going to collapse? Are we going to buy something worth much less in a year or two? As an investor, this is not what you want to see happen.
Faced with higher borrowing costs and questions over how much banks will lend them, residential property investors have been hardest hit by the Reserve Bank’s six consecutive increases since May that have the benchmark lending rate at 2.6%, down from a record high of 0.1% cent.
Between late April and late August, new home loan commitments to investors fell 20.1%, compared to a 9.9% drop for loans to first-time buyers and a 10.8 drop to subsequent buyers.
(First-time homebuyer loans, however, had already fallen from their much earlier peak in January 2021.)
Weaker investor demand partly explains the fall in house values, which, according to figures from CoreLogic, fell 1.8% in September in Sydney, 1.1% in Melbourne and 1.7% in Brisbane.
But the declines also reflect homeowner sentiment, and they were most pronounced in upscale areas. In Sydney, the steepest declines from their recent peak occurred in Warringah (down 16.6%), Pittwater (down 16.3%) and Leichhardt (down 16%).
In Melbourne, Stonnington East is down 13.3% and Maroondah and Glen Eira are both down 10.6% from their highs.
Right now, the general investor consensus is “If I buy too early, there’s not much appreciation or growth.”
— Altium Realtor Duncan Grady
The end in sight to rate hikes should keep investors coming back, says Tim Lawless, director of research at CoreLogic.
“It’s arguable that investors could become more active as the dust settles on the rate hike cycle, taking advantage of lower house prices and tight rental conditions while positioning themselves for gains in medium and long-term capital,” Lawless said.
But the category of borrowers hardest hit by soaring costs has yet to return.
In what is the country’s most active market, Western Australia – where suburbs in Perth’s sprawling northern suburbs spend the fewest days on the market of any recorded area – investors represent only a small more than a quarter of sales, the lowest of any state. or territory bar the NT.
And in Sydney, the country’s investor capital – investor buyers in New South Wales accounted for 36.9% of all new home loan commitments in August – agents say they are at an all-time low.
“Sydney investors are focused on growth. Right now, the general consensus among investors is, “If I buy too early, there’s not much appreciation or growth in the near term,” says Altium realtor Duncan Grady. Property Mosman.
“Investors are not very numerous. They’re over there. We see them. But certainly not the great strength of the market right now. »
In Victoria, investors accounted for 30.1% of new home loans in August, lower than Queensland’s 32.1%, ACT’s 31.6% and SA’s 30.9%. In Tasmania the figure was 28.3% and NT 16.4%.
Despite the recession, appreciation in asset values – spurred by tax deductions such as negative debt and capital gains tax deductions – may make residential real estate an attractive investment.
But that doesn’t do much to improve accessibility or increase stock levels. Although some investors are creating new homes – Inati’s last investment was to demolish an old house and build three townhouses on the block – a Report of the Grattan Institute in 2016 found that between 8 and 14 percent of all investment property loans were for new housing.
Unlike investors, some real estate agents say first-time home buyers are coming back to the market.
“Buyers have returned,” says David Hill, partner at Stone Real Estate Crows Nest, which sells apartments in the first-time home buyer market.
“We were going from five to ten groups [open inspections]. In the last four weeks since the beginning of spring, we have noticed groups of 30 people showing up in the first and second weeks. »
But it depends on the property. Last Saturday, Woodards’ agent Ruth Roberts auctioned off a one-bedroom flat in Elsternwick, Melbourne’s southeast. Two potential bidders, both young first time buyers, were fighting over the apartment. A nearly identical unit in the building had sold five weeks earlier for $370,000.
It passed and she ended up negotiating with the father of one of the buyers.
“I was hoping to get $370,000 for the one I was selling,” Roberts says.
“I said the last one sold for $370,000 and he said there have been interest rate hikes since then. He probably would have paid $370,000, but not now.
The unit sold for $367,500.
“Budgets are shrinking,” Roberts says. ” They are afraid. They are still uncertain about the future.
Greater clarity on the trajectory of rate hikes will come with the next Reserve Bank board meeting in the first week of next month and then again in the first week of December.
Confirmation that interest rate hikes will be contained – many economists expect them to come in at around 3.1% – will bring many back into what should already be a strong market in late spring and early in the summer, according to agents.
“I expect confidence to pick up, certainly between here and Christmas,” says Melbourne agent Greg Bowring.
“December will be a wild ride. People will leave things for the last minute.
Sales were expected to continue until Christmas Eve, Bowring said.
“It’s the fourth Saturday in December,” he said. “I think it will be loaded with properties.”
Even investors sitting on the fence could be persuaded to move, Inati says.
“If something came up and I thought ‘Awesome’, I’d probably jump on it,” she says.
“Even though you don’t want to see your investment worth less in a few years, I view investing as a long-term thing. Ten to twenty years later, I don’t think you can lose.