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Spring market update: What you need to know

By Emma Smith

Article Written by Nerida Conisbee and published on 03 NOV 2017

Summer is nearly here but we still have one more month of the spring selling season.

So, how is the market performing and have there been changes from the predictions I made at the start of spring?

Property investment has peaked

Conditions continue to get tougher for investors.

Access to finance is more difficult and home loan rates for investors are moving higher. It was therefore not surprising that demand for apartments in September, the majority of which are owned by investors in Australia, has declined.

While finance is the biggest challenge, fears over taxation changes and continued warnings about debt levels will lead to a further slowdown.

The growing potential for a change in the federal government leadership will further slow this group of buyers.

First-home buyers fight back

Changes to stamp duty and first homeowners’ grants, particularly in NSW and Victoria, led to a resurgence of first-home buyer lending in August.

While these schemes are often criticised for increasing prices, there is no doubt they provide a strong incentive for buyers.

The other positive sign for this group is that investors are pulling back.

Given that the price points that both first-home buyers and investors target are often similar, fewer investors means less competition.

Prices will continue to moderate

As predicted at the start of spring, price growth continues to moderate.

The slow down appears to be most marked in Sydney where declines in demand for apartments, in particular, seem to be impacting this market.

Melbourne continues to hold up, however demand is not as strong as it was this time last year.

The key driver of price moderation in our two biggest markets has been home loan rate increases by banks, independent of the Reserve Bank’s monthly decision.

It is likely that these rate rises will continue for the remainder of the year unless the RBA decides to cut rates, which is unlikely but not impossible.

Affordable locations continue to be most in demand

No one enjoys a big mortgage and more affordable locations continue to see strong demand, a situation that has remained unchanged this spring.

The most in-demand suburbs in Australia right now are in Tasmania – South Hobart and Battery Point.

Affordability is likely to be a big driver of this given the price discrepancy between Hobart and other capital cities.

In NSW demand in regional areas continues to grow with around two-thirds of potential Sydney buyers now also looking at regional areas.

Central Coast and Wollongong are the main destinations given the ability to commute to Sydney from these areas.

Building approvals continue to slow

Fewer investors, plus concerns about oversupply in some apartment markets, is contributing to building approvals slowing across the country.

While not an immediate problem in high supply markets like Melbourne and Brisbane, the situation continues to be problematic in Sydney where the building boom was slower to start.

Longer-term, less supply means higher prices for renters and buyers.

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