Welcome to this week’s edition of Property Edge, where we bring you the latest insights and trends in the Australian property market. From changing lending rules to rising foreign investment and promising growth forecasts, we cover everything you need to stay informed and make savvy decisions in this dynamic market.

Quick heads-up: Before we get into the details, we wanted to share something. Dominique ran 5 sessions this week doing a final intake for a handful of people who want to work with her personally to make 250K in flipping property over the next 12 months (with the first 100K in 3 months).

This is the final intake because we are super focused on building a system that leverages AI to help you get results in property (which we cover in the presentation – it’s pretty powerful).

Click here to get the replay (only available for 72 hours).

New Lending Rules Marginalise Middle Australia: ANZ Chief

Overview: ANZ chief executive Shayne Elliott has voiced concerns over current lending regulations, asserting that they are sidelining middle Australia from obtaining home loans. Elliott notes an excessive focus on minimising financial-system risk, which is affecting the average Australian’s homeownership prospects.

Current Situation: While Elliott recognises the Australian Prudential Regulation Authority’s (APRA) duty to shield depositors from risky lending, he insists on the need to reassess responsible lending guidelines. He argues that both high property prices and reduced access to credit are making it difficult for Australians to afford homes.

Significance: These lending restrictions present an additional obstacle for Australians already struggling with high housing costs. This issue arises amid forecasts of multiple interest rate hikes by the Reserve Bank of Australia (RBA) to address ongoing inflation concerns.

Key Points: Economists suggest that significant rate increases might be necessary, with JBWere’s Sally Auld predicting rates could need to approach 5% to effectively manage inflation. Furthermore, Fitch reports that mortgage arrears are at their highest level in five years, signalling increased financial pressure on homeowners.

Detailed Analysis: According to The Australian Financial Review, a 0.25 percentage point rise in interest rates could significantly reduce the financial relief expected from upcoming tax cuts, potentially undermining government efforts to alleviate living costs.

This highlights the intricate relationship between lending policies, interest rates, and housing affordability in Australia.

Foreign Demand for Australian Property at an All Time High

Overview: Foreign buyers have significantly increased their purchases of Australian real estate over the past financial year, spending 4.9 billion on 5,360 properties, according to data from the Australian Taxation Office (ATO). This marks a substantial rise from the previous year.

Current Trends: Most foreign buyers come from China, Hong Kong, and India. Despite making up only a small fraction of the total market, their activity is noteworthy, particularly in cities like Melbourne and Sydney. Real estate agents report that families overseas are increasingly buying properties for their children who study and work in Australia, with many aiming to become permanent residents.

Key Points:

• Foreign buyers purchased 5,360 properties in 2022-23, up from 4,228 in 2021-22.
• The average purchase price was 914,000, with China leading the investment.
• Foreign buyers still constitute about 1% of all real estate purchases in Australia.

Impact on Affordability: CoreLogic’s head of research, Eliza Owen, argues that banning foreign buyers is not a solution to housing affordability issues. Despite increased foreign investment, home prices fell nationally by 2% last year. Restrictions on foreign investment, including additional fees and levies, ensure that the impact on the market remains limited.

Luxury Market: High-end properties continue to attract wealthy overseas investors. Real estate agent Michael Christie notes significant purchases by affluent buyers from Asia, with transactions for luxury apartments in Melbourne and Sydney hitting millions of dollars.

Outlook: Demand from foreign buyers is expected to remain strong. Real estate professionals anticipate sustained interest in both new developments and established homes, driven by Australia’s perceived safety and stability. The ongoing national property shortage and continued influx of international students and families support a positive outlook for the market.

Why Now is a Great Time to Buy a Home

Overview: Current trends indicate that now may be an ideal time for prospective home buyers in Sydney and Melbourne. With fewer bidders at auctions and an increase in property listings, the competitive landscape in these cities is becoming more manageable.

Auction Dynamics: Data from Ray White shows that average bidder numbers have decreased year-on-year, with Sydney averaging three bidders per auction in May and Melbourne 2.5. This decline from last year’s figures of 3.3 and 2.9 respectively suggests a less competitive environment for buyers.

Increased Listings: The number of auction listings has risen significantly in both cities, with Sydney hosting 399 Ray White auctions in May (up from 292 last year) and Melbourne 616 (up from 429). This influx of new properties has diluted the buyer pool, making it easier for potential buyers to navigate the market.

Expert Insights: Ray White chief economist Nerida Conisbee notes that the increase in property listings is reducing the number of active bidders per auction. This trend, coupled with stagnant price growth, presents a favourable market for both first-time buyers and those looking to upgrade.

Market Conditions: Melbourne’s property market has shown signs of weakness, with a median house price increase of only 0.7% in the year to March. High interest rates and a weak economy have contributed to this subdued growth, offering buyers more leverage and negotiation power.

Affordability and Opportunity: CoreLogic’s head of research, Eliza Owen, emphasises that fewer bidders and lower competition make it a less stressful and more affordable time to buy. The current market conditions are particularly beneficial for first-time buyers who prefer stable markets over fast-moving ones.

Property Types and Buyer Interest: According to Belle Property agent Stephanie Evans, while some properties still draw significant interest, many auctions are seeing only one or two bidders, with several properties being passed in for post-auction negotiations. Renovated properties tend to attract more attention, but overall, the increased number of listings is providing buyers with greater choice.

Outlook: AMP chief economist Shane Oliver advises that the current market, characterised by fewer bidders and less competition, offers buyers a better chance to secure properties at favourable prices. However, potential future interest rate hikes could influence this dynamic, potentially increasing the number of listings as some homeowners struggle with repayments.

PropTrack Property Growth Forecast

Overview: According to PropTrack’s Property Market Outlook Report for June, Australian property prices are projected to increase by up to 5% in 2024. This follows a robust 2.7% growth from January to May 2024.

Regional Performance:

• Perth: Leading with an 18.9% increase this financial year, and an expected 8% to 11% growth in the 2024-25 financial year.
• Other Major Cities: Brisbane, Sydney, and Melbourne are forecasted to see price rises between 3% and 6%. Adelaide is projected to grow by 5% to 8% in FY25 after a 12.9% increase this financial year.

Economic Factors:

• Market Resilience: Cameron Kusher, director of economic research at PropTrack, highlighted the strong buyer demand despite high-interest rates and increased stock availability.
• Buyer Demand: Remains strong even with 12-year high interest rates and falling borrowing capacities.

Fiscal Policies:

• Stage 3 Tax Cuts: Expected to stimulate market demand alongside anticipated interest rate cuts in FY25.

Market Dynamics:

• Sales Volume: National sales volumes increased by 13.9% from January to May compared to the same period last year.
• Listing Times: Median time properties remained listed on realestate.com.au decreased, indicating a strong market.

Outlook:

• Future Growth: PropTrack anticipates slightly stronger home price growth by the end of the 2024-25 financial year compared to the 2024 calendar year, with prices expected to rise particularly in Sydney and Melbourne.

Thank you for reading this week’s Property Edge. Stay tuned for more updates and expert analysis to help you navigate the ever-evolving property landscape. Happy investing!

Warm regards

The Property Lovers Team

Replay Alert: Available for 72 hours

Quick heads-up: We ran 5 sessions this week doing our final intake for a handful of people who want to work with Dom personally to make 250K in flipping property over the next 12 months (with the first 100K in 3 months).

This is the final intake because we are super focused on building a system that leverages AI to help you get results in property (which we cover in the presentation – it’s pretty powerful).

We are putting up the replay,(only available for 72 hours).

Click here to get the replay.