Yahoo Finance Property rebound: The Aussies still able to buy a home
As interest rates rise, and property prices bounce back, just who is still buying right now?
What sort of buyer is wading into the fray now, with the Reserve Bank (RBA) sending interest rates higher, higher, and still higher?
Nobody publishes the names and addresses of buyers, so we can't answer the question directly. But we can get some big clues from the data on lending, and it reveals the profile of buyers lies in places quite different from what we have seen in the past.
Also by Jason Murphy:
The first thing to point out is that, in NSW, buyers are back. That’s where prices are rising the fastest, up 4.7 per cent in the past three months, according to Corelogic data. So, what sort of buyers are back and spending up big?
To answer that question, the first thing to consider is that rents are rising. Rising rents is basically irresistible catnip to property investors. As this chart shows, investors are still attacking the market with even more vigour than pre-pandemic. Of course, in most states, owner-occupiers have bounced back a little and investor dominance is not as pronounced as it was in 2022, but in NSW, investors are still taking around 60 per cent of the loans (by value).
Across Australia, investors are more active than they were pre-pandemic. But NSW is the only state where the investor share is above 50 per cent.
And what sort of homes are we talking about?
The answer: established homes in established suburbs. As the next chart shows, trade is usually about established homes, not new builds, and that trend is even more pronounced right now. The preference for picket fences over balconies and that freshly built smell contrasts with early 2020, when the ratio dipped to its lowest on record as a lot of new builds were sold. The more recent trend makes sense when you consider building has been slow, and building materials very expensive. So, fewer new homes are for sale.
The volumes being traded are smaller than before so it is possible the few buyers of established homes are having an outsized effect on property price statistics.
The data also shows that first-home buyers are in retreat. To buy a home in today’s market, you’d want a hefty deposit: preferably one obtained by selling the current house you live in. First-home buyers, who are grinding to build their deposit, have been having a hard time adding to their savings in a world of rising rents. They aren’t well represented in the market right now, generally running at about half of the 2002 peak.
Prices are rising but are still below the 2022 peak, so loan sizes are smaller now in most states. The exception is South Australia, as the next chart shows.
In South Australia, mortgages have never been bigger, which is related to the fact that house prices haven’t retreated as much there.
Of course, the data above covers only those buyers who need to borrow to buy a house. Cash purchases fly beneath the radar. Although, we did learn this week that more than a quarter of homes bought in Queensland, Victoria and New South Wales last year were paid for with cash, according to new research by PEXA.
If you have no loan, the interest rate rises don’t matter at all and the rising price of rent is all upside. Property has to be an attractive place to park cash these days and, as long as rents continue to rise faster than property prices, the yield on it will keep rising.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.
