In 2017, the two key words in the Australian real estate market are “tight” and “slow.” Tight, refers to the control policy tighten, slow, refers to the rate of price increases have slowed. Looking to the coming year, regulators on the property market will not be cautious next year …

In 2017, the two key words in the Australian real estate market are “tight” and “slow.” Tight, refers to the control policy tighten, slow, refers to the rate of price increases have slowed. The market generally believes that the Australian real estate market sitting in the “household debt rate is too high,” the gunpowder barrel has been a long time, coupled with the stagnation of wage growth for some time, regulators on the property market will not be cautious in the next turn around.

How the property market next year, how to go, the first look from the three major buyers groups.

According to QBE’s 2017-2020 Australian Real Estate Outlook Report, first time home buyers are currently the youngest in the property market, with home traders the traditionally largest group and in recent years investors have become the largest buyers in some states .

First home buyer

Since the end of 2014, the demand for first time homebuyers in Australia has been declining. Despite the recent slowdown, the first home buyers loan in 2016/17 is still down 0.4% from the previous year. Lower mortgage rates have helped to ease the mortgage burden, but rising home prices in some markets have made it more difficult for first-time home buyers to deposit at lower incomes.

It is worth noting that signs of an increase in first home buyer demand are emerging and first home buyers’ loans have risen 13% over the same period in the three months to July 2017.

The Turnbull government values the importance of first home buyers as it creates the need for entry level properties. Therefore, when the market is weak, incentives are often introduced to promote first home buyers’ needs.

On December 7, the Australian Senate passed legislation, the First Home Buyers Super Savings Plan (FHSSS). With FHSSS, individuals can voluntarily deposit A $ 30,000 (up to A $ 15,000 per annum) in their pension accounts. A eligible couple can deposit a maximum of $ 60,000 in a pension account.

Beginning on July 1, 2018, first time homebuyers will be able to withdraw their savings deposited on a voluntary basis in a pension account after July 1, 2017 for the purchase of a home. This means that under the FHSSS, first-time homebuyers can enjoy a certain tax credit for saving the first payment.

The report notes there is some evidence that more and more first home buyers, particularly in high-priced cities in Sydney and Melbourne, buy real estate as their first home and market stepping stone. Affected by this, the number of first home loans owned by home owners decreased by 0.4% over 2016/17, unchanged from the past two years.

New South Wales (-6.6%) and Western Australia (-6.5%) saw the largest decline in 2016/17, with less decline in Victoria (-2%) and South Australia (-1%). Northern Territory loans increased 460 to 600, due to falling prices to improve the affordability of first home buyers. Queensland (+ 11.2%) also improved, with the capital (+ 1.7%) and Tasmania (+ 0.3%) slightly higher.

The steady rise in Queensland may reflect an increase in the net inflow of interstate settlements. Southeast Queensland is often a “refuge” for residents who can not afford Sydney rates.

State and federal governments offer some first-time homeowners incentives, including cash allowances and tax breaks. Recent changes have prompted NSW to introduce a stamp duty relief package for its first purchase below $ 650,000, while Victoria has increased its first-time home buyer stamp discount below $ 600,000 from 50% to 100%. All home buyers in NSW no longer have to pay stamp duty on mortgage insurance.

Non-first time home buyer

Over the past 15 years, the exchange of properties (from big to small, small to large) is the largest component of residential demand in history, accounting for 42% of total residential loans, two to three times the size of the first homebuyer market.

Demand for home exchange has bottomed out in all states since 2011 and 2012. As of June 2016, there has been an increase in demand for upgrades, with almost no change in upgrade demand in the 12 months to June 2017.

Non-first home buyer loans across the country slowed down in 2016/17 by 0.1% following a strong increase of more than 13% in 2015/16. The flat curve masks changes among states, with non-first time buyers being particularly strong in some states and declining in the other states, resulting in no net change at the national level.

After strong growth of more than 13% in 2015/16 to 16, the “upgraded” and “reduced” loans in New South Wales and Victoria increased only by 0.2% and 0.7% respectively. Similarly, the figure for South Australia rose by 0.6% after an increase of + 3.5% in 2015/16. Queensland’s home improvement loans increased by 0.7%, unchanged from the 0.8% increase the previous year. In 2016/17, Tasmania’s home loans increased significantly, up 13.1% over the same period of last year. Active housing exchange activity has supported the strong growth of house prices, especially in the capital Hobart.

In contrast, the Northern Territory (-12.1%) and Western Australia (-7.9%) are less active, reflecting the property market downturn. The number of home-swap loans in the capital area is almost the same in 2016/17 as compared with the previous year.

Three types of mortgage showed a more significant change (3-month rolling average)

Investment loans (purple) finished lower, the first home loans (dark blue) pulled up
(Source: 2017-2020 Australian Real Estate Outlook)

investor

In 2014/15, investor buyers became the largest part of all housing loan activity in the country, accounting for 51% of total home loans. In response to concerns about speculative investment levels, APRA gives guidance to financial institutions to reduce high-risk loans and curb investor loan growth.

Investor loan growth peaked in 2014 and then declined steadily, dropping by 17.2% in 2015/16.

Although banks have tightened their lending policies to investors repeatedly, loans from investors are still increasing, rising by 11.1% in 2016/17. This is mainly due to investors returning to the market after a rate cut in 2016, with the main players being apartment buyers in Melbourne, Sydney and Brisbane. However, as banks tighten their lending policies to investors, investment demand slowed in 2017.

At present, Sydney, Melbourne and Brisbane, the completion of investment-type apartments reached a record level, these residential mortgage is likely to be approved. NSW and Victoria were the major beneficiaries of a rebound in investment loans, with home equity investment increasing by 19.7% and 13.9% respectively. Investment mortgages in Tasmania (+ 12.8%) and the capital (+ 21.4%) also showed strong annual growth. Investment loans in Western Australia (-17.6%) and Northern Territory (-22.8%) recorded the largest losses, with Queensland (-1.6) and South Australia (-0.3%) having little net change in 2016/17.

Also need special attention is foreign buyers. Australia has always been a favorite destination for foreign investors. The total value of homes approved by the Foreign Investment Review Board (FIRB) soared from A $ 6.09 billion in 2009/10 to A $ 60.75 billion in 2014/15 and continued to rise to A $ 72.2 billion in 2015/16. These investments are mainly concentrated in NSW, Victoria and Queensland. Overseas buyers can only purchase new dwellings, temporary dwellings can buy dwellings that have already been built but must be sold on exit.

NSW, Victoria, Queensland and Western Australia impose additional stamp duty rates of 8%, 7%, 3% and 4% on foreign buyers respectively. In 2017, NSW increased its land tax surcharge of 0.75% to foreign buyers and will raise its land tax from 2% to 2018. Victoria charges a 1.5% land tax surcharge for absentee owners (mainly foreign buyers).

 

2018 outlook

First home buyer

State government has already subsidized from the already completed housing subsidies to new homes. This is to support the supply of new housing and prevent competition for existing stock houses. New Jersey and Victoria, the two states with the worst affordability, have implemented full stamp duty concessions on completed homes since July 2017. As a result, first home buyer loans in the two states increased by 46% and 19% respectively over the previous year in July 2017.

New South Wales stamp duty relief threshold 650,000 yuan, lower than the Sydney outer ring median price of 784,000 Australian dollars. This shows that the cheaper unit market will benefit. In Victoria, the threshold of $ 600,000 in stamp duty relief is only slightly below the $ 618,000 median house price in Melbourne’s outer ring, meaning demand for units in these areas will increase.

Non-first time home buyer

On Dec. 5, the Reserve Bank of Australia released a resolution to announce that it will keep its cash rate unchanged at 1.5% for December, saying “the low interest rate will continue to support the economy of Australia.” Given the available information, the Board of Directors judged this Meeting to maintain the interest rate policy unchanged contribute to sustainable economic growth, and gradually reach the inflation target. ”

It is expected that low interest rates will continue to support the demand for changeovers in some markets. The steady rise in prices will encourage the sale of existing homes. However, if the price falls, the exchange of housing activity may continue to weaken.

investor

Investor demand faces a series of resistances and is expected to continue to be dampened by regulation in 2017/18. The resulting slowdown in prices will further hit investors. APRA is expected to further limit if the demand from domestic investors continues to grow. Likewise, the continued strong demand from foreign investors may be further hampered by federal and state government policies.

In addition, in August 2017, the Chinese government began to limit overseas real estate investment. This does not target individual investors in overseas properties. Instead, it wants to curb irrational investment in residential development. In the short term, this is unlikely to have a significant impact on the Australian market. However, the medium term may lead to an earlier tightening of supply which will lead to rental growth.