The Week In Real Estate 8th December

36% Of First-timers Opt To Invest

New research from the Property Investment Professionals of Australia (PIPA) has found that one third of first-time buyers are opting to invest rather than to buy a home. The 2018 PIPA Investor Sentiment Survey found that 36% of first-time buyers had opted to invest and continue to rent instead of buying a home to live in.
PIPA chairman Peter Koulizos says this shows that first-time buyers have been more active over recent years than official statistics originally recorded, noting that the ABS publicly admitted issues with FHB statistics from 2012 to 2016. This was due to some lenders only reporting loans to FHBs who received government grants (which were restricted to first-timers buying new properties only and did not include investment purchases). “There’s no doubt that softer market conditions are making it easier for FHBs when it comes to purchase prices,” he says. “However, lending restrictions are conversely making it more difficult for them to secure finance.”

Rates Likely to Stay Low For Longer

Fewer analysts surveyed by comparison site Finder believe the next rise in interest rates will be up. The Reserve Bank this week left the official cash rate unchanged at 1.5%, the 26th consecutive time the bank has left the rate on hold. Most experts believe the next change in rates, when it comes, will be up, but at 78% that is much lower than the 88% who thought the same when they were surveyed in September. As to when the expected rise will happen, only one in 10 experts expect it in the first half of 2019. Just over 40% expect an increase in the second half of the year, while almost half are not expecting an increase until 2020 or later. “Through the last few months we see the forecast for when the next rate increase will come push further and further into next year,” said Graham Cooke, insights manager at Finder. “Now it looks like we could see another 11 RBA hold-decisions, as the experts foresee the possibility of no movement in 2019.” Over half of the experts report a positive outlook for housing affordability and employment, up from just under half last month.

Resources Mini-boom Lifts Economy 

A mini-resources boom has gathered steam over the past year and is making a significant contribution to Australia’s strong economic performance, with the resources sector is adding to investment, output and income. The year has brought the best global growth since before the financial crisis and the resources sector has been the main conduit for that performance flowing through to the Australian economy. In the year to September, spending in the resources sector was $35.5 billion, down 6.7% from the previous year. However, the fall was driven exclusively by the approaching completion of the last of the seven giant LNG projects. In the 12 months to September, spending in the gas and oil sector dropped by $7.3 billion, or 30%. Across the rest of the resources sector, investment over the past 12 months has risen 34% to $18 billion, led by increased spending in iron ore and coal. Investment in both these sectors had been in sharp decline since the end of 2012 as projects were completed and companies redoubled efforts to cut costs amid falling prices.

Expats Boost Prestige Homes 

An expat-led boom for prestige property markets is predicted. A weak Australian dollar combined with Brexit in the UK and the Trump factor in the US is leading to a surge of summer inquiries from overseas Aussies wanting to buy back home. “This is the most active I’ve known the expat market in the last five years,” says agent Anthony Walls. “With the Australian dollar dropping well below 80 cents American, it means expats are effectively buying at a 30% discount.” In Sydney, expat buyers are seeking properties in areas such as Darling Point, Vaucluse, Rose Bay, Bellevue Hill, Paddington, Woollahra and Elizabeth Bay, says BradfieldCleary director Bob Guth. “Many are looking for property they can rent out for several years with a view to coming back to live in it later,” he says. “Others, with the Australian dollar slipping so much, are looking for investment properties.” In Melbourne, homes near good schools are expats’ main focus, particularly in South Yarra, Toorak, Brighton and Hawthorn, says Kay & Burton managing director Ross Savas. “The level of interest is enormous and it will continue to grow,” he says. “The dollar has helped a lot of people wanting to come home.”

Property
Investment Professionals of Australia chairman
Peter Koulizos