Investors set to storm Australia’s housing market

Peter Koulizos, chairman of lobby group Property Investment Professionals of Australia (PIPA), claims that investors are set to storm Australia’s housing market:

Peter Koulizos… said there had been a surge in buyer sentiment in recent months, with corresponding price increases in Sydney and Melbourne.

The organisation has just released the results of a survey of its full membership, which found that 82 per cent of investors view now as a good time to buy residential property.

About 48 per cent of respondents plan to purchase in the next six to 12 months, the survey found.

That return of optimism, combined with spikes in activity from other buyers — particularly first-timers — indicates that a market recovery is in full swing…

“It’s clear that many investors, regardless of their political leanings, were fed up with being told they were ‘greedy’ when the vast majority only own one property and are just trying to improve their financial futures,” Mr Koulizos said…

PIPA would see the approach of a killer asteroid as bullish. Investor demand has rebounded modestly:

The current price increase is being driven more by owner-occupiers, which have rebounded more strongly:

That said, the conditions are ripe for investors to pile back in and they do tend to follow owner-occupiers rather than lead at price turns.

Reforms to negative gearing and capital gains taxes are dead and buried. Australia’s entire fasco-housing complex has colluded to drive house prices higher by trashing mortgage standards and sucking in first home buyers. And mortgage rates have cratered, crunching cash returns and opened positive gearing opportunities.

At the same time, risks are building for the Australian economy, which presents stiff headwinds for the housing market over the medium-term.

These issues were analysed in detail in our Q3 Special Report.

Comments

  1. Had lunch with a property investor today.Has 35 houses.Had to talk with bank manager during lunch.Bit tough now was converted to interest and principal and reant isn’t covering costs.Also can’t refinance

  2. Fantastic news for any of the wise investors, even the ones with the balls of steel who have “held” till now, who will be divesting themselves of their property portfolios now. There probably won’t be another chance like this one, before the crash. There might be a couple of years of frozen market before the crash, with divestment impossible, and everyone knowing in their bones that it is curtains this time. This is how it always goes. You have to have balls of steel, and really, really understand “cycle length” and psychology – because the fundamentals don’t affect the timing, they affect the magnitude. Ireland will look lucky to have had its crash in 2007 with the highest median multiple, in Dublin, at 6.5. Australia’s median multiples were within a similar range at the time, and getting the crash over with properly was the truly lucky option, and pulling dirty tricks to push it forward into a new super, double sized cycle, was expedient, crazy, and treacherous.

    • The dynamic here that people fail to appreciate is that when prices fall capital is degraded:

      1. Investors sell and realise losses i.e. they won’t be the ones getting back into the market because they have less equity now than before (if they have any equity at all)
      2. Equity release opportunities are diminished because, in the vast majority of cases, valuations are lower today than they were a year or two ago.

      In other words, most investors getting today are cash rich or complete newbies.

      • Which is why I’m inclined to view any corrections in terms of reduced collateral, it fit in with my mental modelling. An example is the destroyed collateral in high-rise not yet realized in sales price but poison for credit expansion

        • 100%
          There is simply less fuel (equity) to push this that much higher. The caveats, of course, are banks accepting progressively smaller deposits, Govt FHB schemes and new money coming from abroad with immigrants.

  3. Even in Perf, stock on market is down in areas i’m looking at and a whole heap going under offer. Banks certainly seem to have let credit off the leash. I wonder if it’s Sydtard investors or locals? Guess I’ll be renting another year. (and Peachy, no I don’t want to hear your “I told you so’s. It’s wearing thin)

  4. The Traveling Wilbur

    Having now read those charts though… Sweet Jeebus…

    If that almost undetectable chart lift has caused those kinds of price increases, imagine what prices are going to do if demand looks anything close to lifting meaningfully.

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