What lures investors away from the market?

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The Housing Industry Association (HIA) addressed the elephant in the room last week as the industry group underscored how increasing deterrents are dissuading investors from capitalising on the home market.

The sentiment was rooted in the recent Australian Bureau of Statistics (ABS) data on housing finance for the month of July 2018 showing the drop in the value of lending to investors. Numbers declined by a further 1.3%, making the value 15.7% lower than in July 2017.

 “Investors played a significant role in the record levels of new home building that occurred in recent years. By the same token, their retreat from the market will weigh on activity over the near to medium term,” said HIA economist Diwa Hopkins. 

Hopkins pointed out that investors started backing out from the housing sector when Australian Prudential Regulation Authority (APRA) intervened at the end of 2014 and in early 2017.  

Directives coming from the government have also contributed to the weakening number of investors.

“In addition, state and federal governments have acted to deter foreign investors by levying additional taxes and charges on their investments in the domestic market,” she said.

 “More recently the Banking Royal Commission has seen lenders further tighten their practices beyond APRA’s initial requirements and yesterday two of the other major banks joined Westpac in raising their variable mortgage rates.”

“Add to this, a situation of falling dwelling prices in the key Sydney and Melbourne markets as well as the prospect of increased taxes on investment housing through negative gearing restrictions and increased capital gains tax, and the list of deterrents to investors in the housing market is comprehensive. “

Ending the disclosure, Hopkins questioned APRA’s plan of action directly.

“Overall, most of these factors are having the effect of limiting credit availability. 

“The concern now is [that] APRA’s interventions appear to have run beyond their usefulness,” she concluded.

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