Invest
Property investor ‘energy’ exits market, what does that mean?
As “bullish” property investors reconsider their strategies, potential owner-occupiers also slip into bearish attitudes, a property research firm has said.
Property investor ‘energy’ exits market, what does that mean?
As “bullish” property investors reconsider their strategies, potential owner-occupiers also slip into bearish attitudes, a property research firm has said.
“When the investor bulls leave the market so too does the energy which drives that market,” RiskWise CEO Doron Peleg said on Wednesday.
“Investor interest is aroused when the market is going up and we see more activity. The investor cohort today has a very material impact on the residential market, particularly in Sydney and Melbourne.”
He said that while bull markets and bear markets are usually referred to when discussing equities markets, similar approaches can be used to analyse the property market.
Mr Peleg said bull property markets have “positive” energies and urgent activity, while bear markets see downturns in price, energy and activity.
Referring to RiskWise’s latest report, published with WargentAdvisory, Mr Peleg said the softening activity comes down to tighter lending standards and credit restrictions.
“The number one indicator for market sentiment is investor lending finance (excluding refinancing),” Mr Peleg said.
According to their analysis, investors accounted for 51 per cent of property finance granted in June 2017 before tighter credit restrictions. However, following the tightened restrictions, this fell to 43 per cent in December.
“If you see there is no increase in investor activity – the dynamic likely to prevail at present due to credit restrictions as detailed in our report – you will also see the annual rate of dwelling price growth slows significantly. In aggregate, therefore, you cannot now expect to see any price growth in the major markets,” Mr Peleg said.
He said investors “amplify” cycles and can even contribute to stability risks, in line with the Reserve Bank of Australia’s assertions.
This is because investors may be more likely to sell their properties as the market wanes, due to their investment nature.
Similarly, in periods of price appreciation, bullish investors will be drawn into the market.
“Investors purchase more off-the-plan dwellings than owner-occupiers, so this cohort can contribute to larger upswings in residential construction with the risk of future oversupply for some types of properties or in some locations,” Mr Peleg said.
“Conversely, elevated levels of investor activity may amplify any subsequent downswing, increasing risks to the broader housing market and household sector.”
Pete Wargent, CEO at WargentAdvisory also referenced CoreLogic’s findings that regulatory changes and the increasing gap between investor and owner-occupier interest rates were having a material impact on investor lending.
“If we don't see any increase in investor activity we won’t see any broader improvement in the major markets. The prevailing dynamic has taken the energy out of the market, and when there is low energy and little aggressive bidding at auctions, property prices tend to decelerate or stagnate,” he said.
“When activity is high, the energy returns to the market and this in turn has an impact on owner-occupier sentiment and activity. While dwelling types are not fully substitutable, the different cohorts may compete for the same properties and we need to understand the connection between them.
“This is a fundamental issue to understand: the ebbs and flows of investor sentiment now have a significant impact on market activity, dwelling prices and construction cycles.”
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
Real estate investment: Spotting high-growth potentials
Investing in real estate has long been a favoured approach for Australians looking to grow their wealth. Read more
Property
Granny flats become Aussie families' cost-effective solution to soaring living costs
As the cost of living skyrockets, a forward-thinking trend is sweeping across Australia – granny flats are becoming a favoured living arrangement for older Aussies seeking comfort and proximity to ...Read more
Property
Homebuyers grapple with extended savings period amid affordability crisis
Gone are the days when an Australian dream home seemed just within reach. The path to homeownership in Australia has extended by at least two arduous years, as revealed by the latest insights from ...Read more
Property
Hybrid development unlocks new potential for NDIS housing in metro hotspots
In a ground-breaking strategy aimed at addressing the stark imbalance between the location of Specialist Disability Accommodation (SDA) developments and the actual areas of demand, Aligned Disability ...Read more
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. Read more
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
Real estate investment: Spotting high-growth potentials
Investing in real estate has long been a favoured approach for Australians looking to grow their wealth. Read more
Property
Granny flats become Aussie families' cost-effective solution to soaring living costs
As the cost of living skyrockets, a forward-thinking trend is sweeping across Australia – granny flats are becoming a favoured living arrangement for older Aussies seeking comfort and proximity to ...Read more
Property
Homebuyers grapple with extended savings period amid affordability crisis
Gone are the days when an Australian dream home seemed just within reach. The path to homeownership in Australia has extended by at least two arduous years, as revealed by the latest insights from ...Read more
Property
Hybrid development unlocks new potential for NDIS housing in metro hotspots
In a ground-breaking strategy aimed at addressing the stark imbalance between the location of Specialist Disability Accommodation (SDA) developments and the actual areas of demand, Aligned Disability ...Read more
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. Read more