With Sydney’s auction clearance rates sitting above 80 percent during the first weekend of September and interest rates remaining low, it appears that the city’s property boom is set to continue well into the foreseeable future.
Buyers aren’t shying away from the high prices. According to the Australian Bureau of Statistics (ABS) the value of new loans (excluding alterations and additions) rose by 0.6 per cent or 2.7 per cent (seasonally adjusted) in July. Investor loans also increased with the value of investment housing commitments (seasonally adjusted) up by 6.8 percent in July 2014.
The Australian Financial Review reports that investor buyers seeking income and capital growth from property purchases currently make up about 40 per cent of all buyers.
The following chart from the House prices, ownership and affordability: trends in New South Wales report documents the levels of owner-occupier and investor finance in Australia from 1985 with statistics gathered from leading financial institutions and lenders.
It’s not only established property that has seen large spikes in investment this year. Loans issued to investors for the purchasing or building of new properties has also risen sharply with loans for new construction increasing 10.5 per cent on last years’ figures.
Despite numerous reports the strength of the property market isn’t only being supported by foreign investors. An article in The Australian recently highlighted that ‘Australian Taxation Office data shows that of the 1.266 million Australians who declared that the rental on their investment properties didn’t meet the interest repayment in 2011-12, 883,325 earned less than $80,000’.
RP Data notes that investment growth has been centred on Sydney and Melbourne. A recent RP Date blog highlights ‘values are rising on the back of increased competition for stock however, with values rising at some point a proportion of the market will no longer be able to afford the homes available for sale. At some point in the future (who knows when) growth in values will slow and interest rates will increase’. While high dwelling approvals over the past 12 months will ease some upward pressure on values more potential buyers may choose to remain in the rental market rather decided to become owner-occupiers.
If you are purchasing a property for owner-occupied or investment purposes contact McLennan Steege Smith and Associates for a professional valuation.