Investors contributed significantly to the heyday of Sydney and Melbourne in which record-breaking price rises were being posted in these markets, according to a report by Yahoo Finance.
The country’s property market is currently weakening, but in the few years leading up to 2017, prices in major housing markets jumped by more than 50%. Since this property price boom, the amount of investor cash entering Australia’s housing market has halved, according to the Australian Bureau of Statistics (ABS).
The downturn may be linked to the restrained presence of investors in the market, given that they have “a lot to do with price increases,” said an industry expert.
“What pushes prices up is when you have more buyers than sellers. For example, at an auction when you have a number of people competing hard for a home. Once you knock the froth off the market and take the excitement away, rather than having a number of people going hard at it you end up with one or maybe two, and most can only go so hard because they’re getting a limited amount of money from the bank,” University of Sydney social economist and housing expert Peter Phibbs told The New Daily.
Investors propelled the substantial value increases in Australia’s two biggest cities more than owner-occupiers, he said.
Lending to investors was down by 47.8% to $4.89 billion in December from its peak of $9.37 billion in April 2015.
The value of home loans issued to owner-occupier home buyers, on the other hand, has barely dropped over the same period— down only 0.2% from $12.53 billion in April 2015 to $12.49 billion in December.
The level of owner-occupier interest in the housing market has been relatively stable, but investors’ appetite has fallen. The pace of the decline in investor housing finance is faster than before as the Sydney and Melbourne downturns have worsened.
Investors also have a significant advantage over potential owner-occupiers due to the government incentive of negative gearing. This may change, though, depending on the result of the federal election.
The Labor Party claims to address the long-outdated negative gearing, but Starr Partners CEO Douglas Driscoll said that that the proposed modifications to the policy could result in a likely influx of overseas property investors.