Housing prices are continuing to fall but a new report says there is little evidence of a “distressed” market.
The Savills Australia Residential Research report for August says Cotality figures showed Sydney dwelling values fell a further 1.4 percent during the month.
Brisbane, Melbourne and Canberra recorded monthly falls of one percent or more.
“Nationally, home values are now 3.6 percent below their March peak, although they remain 2.7 percent higher than a year ago,” Savills said.
“While the headline numbers point to a broader downturn, there is little evidence of a market in distress.
“Distressed listings remain close to a seven-year low…with many households supported by built-up equity and choosing to sit tight or refinance rather than sell.”
The Savills report said a lift in listings over the traditionally busier spring period was likely to keep a downward pressure on values.
This would be tempered by an underlying supply-demand imbalance, supported by population growth and falling levels of housing delivery.
Report authors Sophie Tonge and Michael Lang said new lending data suggested investor behaviour may already be shifting following the May Budget tax changes.
Total lending for home purchases fell 5.2 percent over the June quarter, a possible early indicator of the reaction to the May Budget tax changes for housing.
“Investors – the group most directly targeted by the policy changes – recorded the sharpest pullback, with total investor lending down 10 percent nationally over the quarter,” the Savills report said.
“Looking beneath the headline, the exemption for new build product appears to have begun redirecting some investor capital into this part of the market, with investors still able to negatively gear new dwellings and retain the 50 percent CGT discount.”
Investor lending for new homes increased seven percent quarter-on-quarter nationally, with Queensland recording the strongest increase.
“Investors are an important source of demand for new build housing, accounting for an average 34 percent share of total lending for new build purchases over the past two years, above the longer-run average of 30 percent,” the report said.
“The share is notably higher in Queensland, where it reached 49 percent in the June quarter, and lower in Victoria at 26 percent, where higher holding costs have weighed on investor demand more broadly.”
Savills said it was too early to draw firm conclusions from one quarter of lending data, but the shift was an interesting indicator to monitor.
It said if investor capital continued to pivot towards new build product, and remained concentrated in certain markets, it was likely to influence future supply tends.
However, in the current market, developers were likely to remain highly selective about where and what they built.
The full report is here
