Will reduced lending to real estate investors put pressure on prices and supply?

A major Australian property lobby group is concerned that reduced lending to real estate investors could throttle the supply of new housing in Australia.

The Property Council of Australia (PCA) believes the latest lending finance figures from the Australian Bureau of Statistics (ABS) could foreshadow price and supply issues in the near future after drop in investment loans for new constructions.

The ABS figures show that over June investment loans for the construction of new dwellings dropped by 5.4%, which could PCA residential executive director Nick Proud believes could put into jeopardy the mix of buyers needed to ensure a solid supply of new housing.

The ABS figure showed lending to owner occupiers in June had grown by 5.5% in seasonal terms compared to May, while the proportion of total housing lending finance provided to investors dropped to 41.6%.

“Although these numbers are strong it is likely that a reduced appetite for lending to investors will start to impact on the number of homes that will proceed through to development,” Proud said.

“What brings developments to market is a good mix of investors and owner occupiers who can ensure that pre-sale commitments are met and projects go from planning to construction,” he said.

“Keeping a strong pipeline of new housing supply for owner occupiers and renters alike is essential to take pressure of prices.”

While the figures have prompted concerns from Proud and the PCA, Rich Harvey, managing director of buyers’ agency Property Buyer believes they may be sign of a more stable market.

“I don’t think there’s going to be too much of an issue, the good developers and the smart investors will still know how to get finance,” Harvey said.

“The measures taken by regulators like APRA are going to increase the integrity in the market and make it more robust,” he said.

“When it comes to off the plan buyers I think what is happening is that a lot of speculative investors, people who buy a couple of off the plan developments and try to flip them in rising market before they’re even finished, are being pushed out.

“They’re not investors that are buying and holding and helping the market, so if they’re being denied finance that’s a good thing.”

 

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