Real estate pressure increases as investors come back into the game

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But in recent weeks, the debate around Australia’s new real estate boom has shifted from marveling at the gravity-defying feats of the market amid a global pandemic to a discussion of how durable fast price the hikes are and where this is all going to end.

Domain senior research analyst Nicola powell said ANZ’s forecast for the price spike could come true, with market conditions reminiscent of the heady days of 2015, a year when investor activity reached an all-time high.

“Sydney had a Saturday [auction] 80% customs clearance rate for eight consecutive weeks, ”she said.

“The last time we saw a long period where customs clearance rates were above 80% was in 2015.

“Liquidation rates correlate with price movements, so I expect we will see big price increases in the March quarter… a big price increase in our capitals.”

Dr Powell said the real estate market was still owner-occupied, but evidence was mounting that investors would soon make their presence felt again.

The economist highlighted the price expectations questioned by the Westpac-Melbourne Institute Consumer Sentiment Index peaking in seven years.

“This part of the index is a better leading indicator of investor confidence,” Dr. Powell said.

“It’s up and what I expect is that investors will keep coming back to the market.

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“Right now it’s about an owner-led housing boom or a housing upturn, or whatever you want to call it, but I think the investors will go up.”

But no matter who buys, Dr Powell doesn’t think annual price hikes of 17% could be sustained over the medium term.

“It gets to the point where affordability issues then arise and, you know, it becomes more difficult for first-time buyers of a home to enter the market and even for homeowners to increase their size,” she declared.

“If you sell in a rapidly changing market, you also buy in a rapidly changing market… and we’ll see fewer buyers in the market because of that.

“We are not at this stage yet, but this point will be reached.”

Policymakers are in no rush to slow down the real estate market. Governor of the Reserve Bank Philip Lowe said last month that its main concern was that buyers and lenders behave responsibly.

Federal Treasury officials told a parliamentary committee At the end of March, not only were they not concerned about house prices, but also that the growth of the market “was helping to stimulate the broader recovery in the whole economy.”

However, Dr Raynor, who is the facilitator of the University of Melbourne’s multidisciplinary program Affordable housing hallmark project, believes Australia is building up trouble by letting house prices run wild.

She argues that there are “two conversations” going on in the real estate market, one about the bulletproof nature of Australian real estate and the other about increasing stress levels related to the real estate market. lodging.

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“We kind of talk about them like they’re separate things, but obviously they’re not,” she said.

“While it can be great for the federal government right now that we have these house prices going up, there will definitely be a hangover at some point, and we just don’t seem to be doing anything to. we prepare or to respond for that. “

Dr Raynor mentions the research of Australian Institute for Housing and Urban Research who found that mortgage debt-to-income ratios among those over 55 tripled from 71 percent to 211 percent between the late 1980s and 2015, and mortgage debt rose 600 percent.

“It’s because over time people buy houses later [in life], they buy them at much higher price-to-income ratios, which means that when they retire, they still have a huge mortgage or they are still renting, ”said the academic.

“There is currently a problem between the haves and have-nots, with the younger generation not entering housing and the older generation seeing their assets increase.

“But in the future, the problem is going to get even worse because when people get to own property; they do it later, they do it in a riskier way.

“How are they going to pay this loan back in the future when interest rates go up or if they still pay it off when they’re finished working?” “

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Spiraling values ​​also had a big effect on price-to-income ratios here and now, Dr Raynor said. Age, with the median home value in Victoria now more than 10 times the state’s median income of $ 74,000.

“Most of the talk right now is that we don’t see higher levels of affordability because interest rates, the cost of money have gone down so much,” she said.

“It may be manageable at this point, but what happens when all these people have entered the market, with low deposits, already mortgaged to a point of risk, what happens when the rates interest increase? “

All of this is personal as well as professional for the researcher who has dreamed for years of buying a modest house with her partner in the middle suburb of Melbourne.

But Dr Raynor doesn’t expect that to happen in the foreseeable future, despite the couple both having good, stable jobs.

“It was the dream, but it bothers me more and more not to do it,” she said.

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