The latest release of the Digital Finance Analytics Household Survey to end March 2018, helps to explain why we think home prices are set to fall further. We discussed four housing and property scenarios in a recent video blog.
But drawing on our 52,000 sample, from across Australia, today we will walk through the top-level survey findings, before later drilling into the segment specific data in later posts. You can read about our household segmentation models here. This analysis of course then feeds into our Property Imperative Report, which we publish twice each year as a summary of our research and analysis. The last edition – volume 9 – from 2017 is still available on request.
The first chart, which looks across our property segments, shows that both portfolio property investors (who hold multiple properties) and solo investors (who hold one, or perhaps two) intentions to transact are tanking, down 8% since December 2017. As we will see later, this is because credit is less available, capital growth has stalled, and in fact only the tax breaks remain as an incentive! This decline started in 2015, but is accelerating. Remember that 35% of mortgages are for investment purposes, so as this demand dissipates, the floor on prices starts to shatter.
Whilst there are offsetting rises from down traders (who are seeking to release capital before prices fall further) and first time buyers (who are being “bribed” by first owner grants) there is a significant net fall in demand. This pattern is seen across the country, but is most prevalent in our two biggest markets of Sydney and Melbourne.
Refinancing is up a little, thanks to the attractive discounts being offered by many lenders, and as we will see the prime driver is to reduce monthly repayments, as currently household finances are under pressure. We release the latest mortgage stress analysis in a few days.
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.