Investor sentiment impacted by skyrocketing property prices 

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Investor sentiment impacted by skyrocketing property prices 

The PIPA (Property Investment Professionals of Australia) Annual Investor Sentiment Survey 2021 has shed light on what investors are thinking in response to the current property market conditions.

The steady decline in housing affordability, with the annual growth rate in housing values reaching 20.3%, has made its impact. Compared to 41 per cent from last year, 71 per cent of investors now believe prices in their state or territory will increase over the next year.

The pandemic has made remote working more commonplace and investors are looking at relocating due to housing affordability and improved lifestyle factors — such as less crowded cities and less active cases —that may be gained from living in more regional areas.

Investors are also favouring regional and coastal areas for investment purposes, with Queensland becoming the leading location for offering the most potential. 58% of investors believe so, and this is up from last year’s 36 per cent.

Compared to last year’s PIPA survey, it seems the positive sentiment gained from booming property prices has now been mitigated by increasing housing unaffordability and the recent rise in COVID cases, which has impacted investors’ willingness to enter the market.

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The current property boom highlights a disparity amongst Australians

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The current property boom highlights a disparity amongst Australians

With the start of 2021 came an unprecedented growth in property prices, mortgages, and auctions. Several factors such as record low interest rates, decreased spending on recreation and holiday due to COVID, and government incentives spurred movement in the housing market, as Australians took the opportunity to invest in property.

In July, housing values in Australia increased by another 1.6%, bringing housing values to 14.1% higher over the first half of 2021, and 16.1% higher over the past year, as reported by CoreLogic. Australia’s property market has not seen this pace of annual growth since February 2004.

A combination of record low interest rates and active listings at approximately -26% below the five-year average in contrast to dwelling sales which have reached 40% above the five-year average has contributed to the property boom.

Increased housing values have allowed existing property owners to reap benefits, while despite lowering interest rates, prices soar out of reach for some looking to get in the market.

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What happens if rates go below zero?

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What happens if rates go below zero?

Even before the advent of COVID-19, Reserve Bank governor Philip Lowe told Federal Parliament’s Standing Committee on Economics that the RBA was prepared to do “unconventional things” to kick-start a flailing economy. The RBA cut rates to an unprecedented 0.25% in March this year. At its meeting this week it lowered its cash rate target to 0.1%. That is very close to zero - is it possible for rates to go negative?

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Is COVID-19 leading to a regional housing boom?

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Is COVID-19 leading to a regional housing boom?

Amidst the tumultuous times of the current COVID-19 pandemic, we have seen numerous changes in the economy. Unemployment is at a record high, yet there has been a surge in the property market as people move to take advantage of lowering interest rates.

But rather than looking for properties closer to urban areas, housing market data has indicated that there is a rising demand for properties in regional markets of Australia.

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The brutal truth on housing. Someone has to lose in order for first homebuyers to win

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The brutal truth on housing. Someone has to lose in order for first homebuyers to win

Housing costs are a big problem for young people. Home ownership is falling fast in Australia, especially among the young and poor. Fewer than half of 25-34 year olds own their home today. Home ownership among the poorest 20% of that age group has fallen from 63% in 1981 to 23% today. At this rate almost half of retirees will be renters in 40 years time.

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Overseas Demand for Australian Property Falling

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Overseas Demand for Australian Property Falling

Historically Australian government strategy, implemented via the FIRB, has been to funnel foreign investment in real estate into creating more housing stock. According to the report, that was the case this financial year with 85% of approvals being for new dwellings or vacant land for development. But we also know that there have been problems with compliance with this law due to poor oversight - many overseas buyers were simply ignoring the guidelines and buying local real estate anyway.

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