Property investors are pouring back into the Sydney market, with low interest rates and an election campaign focused on negative gearing set to add fuel to the fire, new data shows.
NSW remained the favoured state for investors, with investor activity up 30 per cent over the month to March, an analysis of Australian Bureau of Statistics data by Domain Group chief economist Andrew Wilson shows.
“Residential investors have stormed back into Australian housing markets with lower interest rates and the prospect of changes to property taxes set to continue to fuel growth in this market segment over coming months,” Dr Wilson said.
The May interest rate cut may already be having an effect, AMP Capital chief economist Shane Oliver said.
“Going by this weekend’s auction clearance rates, which was at around 80 per cent on preliminary numbers, it looks like the rate cut may have had an impact in picking up activity,” Dr Oliver said.
But it could also be a bounce back after several months of lending restrictions and “negative commentary, declines in property prices and so much talk about an unsustainable bubble”, he said.
It’s also a possibility that investors could be nervous about the chance negative gearing will stop for all except new properties.
This could be leading to investors having a “get in now while they can” approach, Dr Oliver said.
Cripes, better rush in and buy! Wait, I know it’s paranoid, but let’s just check on the Domain stats before we do.
First, the article is clearly designed to confuse March mortgage data (in the chart) with the recent May rate cut but, well, a positive spin is understandable in real estate. It’s a feel good sector.
Second, let’s just cross-check what the March data looks like if we add owner-occupiers in terms of the actual dollar value of mortgage lending:
Oh dear, the investor proportion of lending is rising because the owner occupier segment was so weak. But, you say, investor borrowing jumped 30% in March. So, it is right anyway.
Except…wait a sec…last March it jumped 39% and, actually, when we look back a bit we find it jumps every March. That is, it is a seasonal pattern coming out of the Christmas lull. That’s why MB uses the rolling annual so that one is not confused by such seasonality:
There is no evidence here of a rampaging horde of property investors piling back into the market following a rate cut that has not yet even happened but there is plenty of evidence that Domainfax has juked the stats.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
