One economist is downplaying the hype surrounding investor demand pushing first home buyers out of the property market, saying he does not regard investor demand as “massively excessive”.
According to QBE’s Australian Housing Outlook Report 2014-2017, prepared by BIS Shrapnel, the value of finance for residential investment has been steadily rising from just under 40% of total residential finance in the year to June 2011, to 45.2% in the year to June 2014.
But BIS Shrapnel managing director Robert Mellor says it is important to take into account the variation of property cycles.
“Cycles in the property market vary; there is no traditional clear pattern. Investors and first home buyers tend to buy the same properties, so it is normal to witness different cycles where those two markets take over each other. If investors weren’t buying up property in this market, then first home buyers would be.”
Mellor says the downturn in the first home buyers’ market is a result of the changing incentives available to first home buyers.
According to the Housing Outlook Report, over the last three years there have been progressive changes in first home buyer incentives to favour new homes over existing homes in a bid to shift demand into the new home market to add to supply in the long-term.
But according to Mellor, there has been a delay in the short-term in the next round of first home buyers, who now have to accumulate a larger deposit to compensate for the lack of financial assistance.
The report shows the biggest losses in incentives for established homes have been in NSW (total reduction of $25,000), NT (reduction of $21,700) and QLD (reduction of $13,700). It also shows that these states experienced the sharpest declines in loans to first home buyers from their previous peak.