Find below a new post from Martin North’s DFA blog in which he lays out recent research showing a lot of concern among investors about the Budget. My own view of this is that there is a certain amount of “sticker shock” at work in these things and unless the Budget directly targets investors via negative gearing roll backs then the impact will be temporary. As you all know, I see this property cycle as extremely risky and the Budget is another cut of the thousands that will wear the cycle away but I’m not especially concerned that the end is nigh.
Anyway, here’s the post:
The latest data from the DFA household surveys is in. In the past couple of surveys rounds, we have been asking potential property investors about their plans in the light of expected budget announcements. We have already noted a potential slow down in the investor segment, the RBA has recently warned investors, and we believe the DFA survey data highlights further risks to the housing sector going forward.
We start with our segmented analysis of households planning to engage in a property transaction in the coming twelve months. We used our household segmentation as featured in our Property Imperative report. We compare the latest data with statistics from earlier in the year, and also last year. We see that investors and portfolio investors are less likely to transact now. In fact, only down-traders are more likely to purchase, and that’s because they want to exploit the higher prices as they sell down. Solo investors were 68% likely, now it has dropped to 38%. A significant move.
Property investors highlight a range of factors which are influencing their decision to hold off. The most significant change is the looming budget, with 45% saying their decisions are being impacted by the speculation and expectation that higher taxes will be imposed in some form.
We drilled into the budget elements, and found that the high income levy was cited by nearly 45% of investors who have decided not to transact at the moment. Potential changes to negative gearing accounted for 31%, and changes to superannuation rules 12%.10% blamed potential changes to other benefits.
So, it is highly likely that measures in the upcoming budget will hit the housing market, and especially the investment sector. This could be just enough to turn the market on its head. Given the RBA has put all the economic eggs in the housing basket, this could a trigger for an adjustment in house prices. In fact, it might just be the trigger for a further interest rate fall later in the year!
