Many investors have sat out of the auction activity over the weekend as they assess what the government’s housing-focused budget could mean for property returns and the broader market.
But despite cooler auction clearance rates across the country, experts say the impact won’t be felt equally across states and territories, with certain market segments at risk of price falls while others will continue to power ahead.
Homeowners at the more affordable end of the market – often in outer-fringe suburbs or high-rise city apartments – are more exposed to the impact of an investor pullback according to industry professionals.
Melbourne based buyer’s agent and president of the Property Investment Professionals of Australia (PIPA), Cate Bakos, said the federal budget has “most definitely” impacted investor sentiment, with many sitting on their hands and reassessing their purchasing decisions.
“I'm nervous about any market that's investor-led,” Ms Bakos said. “I think your lower price points are the ones that are probably more in danger of price falls.”
She said investors that target areas with owner-occupier appeal will be in a better long term position because they're not exposed to the smaller investor segment of the market.
Markets that are popular with investors could see the biggest impact from the government's budget measures. Picture: Getty
Melinda Jennison of Brisbane’s Streamline Property Buyers and president of the Real Estate Buyers Agents Association of Australia (REBAA) agreed, saying “without a doubt”, investors had pulled back.
“We've seen some markets propped up by investment activity, and I feel they're the markets that could be at risk,” Ms Jennison said.
“There are markets across Brisbane that have been for many years owner occupier-driven markets, and more recently we've seen some markets across Greater Brisbane that have been more investor driven.
“It's typically in the more affordable price segments that we've seen a concentration of investor activity over the last four or five years.”
Affordable housing boom may stall
Recent data from PropTrack revealed the more affordable segment of the market has been outperforming mid- and upper-tier price points this year as rising interest rates funnel buyers towards cheaper houses or apartments.
PropTrack senior economist Anne Flaherty said inner city apartments that are traditionally popular with investors would take a hit at both ends - with values expected to ease, while renters could end up paying more for limited stock.
"This is your classic investor grade stock. It's less popular with owner occupiers, more popular with investors, and now we're in a situation where investors are being disincentivised from buying these kinds of properties, so I think that we might see a value hit in those markets," Ms Flaherty said.
"For people who already own that stock, it's likely rents are going to increase more rapidly in those markets than they would have done otherwise.
"And the reason for the yields to increase is because there are fewer investors in the market."
Inner city apartments that have traditionally been popular with investors could see values fall and rents rise, experts say. Picture: Getty
It comes as auction momentum cools across the country, with the national preliminary auction clearance rate falling below 50% in the week following the budget.
"It's a clear sign that buyers are very nervous at the moment," Ms Flaherty said, noting auction clearance rates have been trending lower in recent months as higher interest rates put pressure on affordability.
Ms Bakos said while all of the auctions she attended in Melbourne over the weekend sold - either under the hammer or during negotiations afterwards – the buyer pool was a crucial factor.
“I observed who the other bidders were at the auctions, and there were no investors,” Ms Bakos said.
“I can say anecdotally, I've had a couple of my investors step down, and I've had one of them decide to only buy new, so [the budget] has most definitely impacted investor decision making, and to a degree, investor willingness to purchase now.
“It will be the affordable markets, and the markets that have been really aggressively driven by investors of late [that are most impacted].”
Melbourne buyer's advocate Cate Bakos said investors were pulling back post-budget.
She pointed to outer fringe suburbs and satellite cities like Bendigo and Ballarat where investors have swarmed in the past 12 months.
“I've had a general rule over the last couple of years that I won't go to Ballarat with less than $650,000. I certainly could. I could buy houses for $550,000 but I don't want to dabble in that end of the market because it's so investor heavy.”
It’s a similar in other major capital cities like Brisbane, Ms Jennison said.
“They’re more likely to be in areas outside of the Brisbane City Council region; some of those areas will be in Moreton Bay, Ipswich, and Logan regions,” Ms Jennison said.
“With investors sitting on the sidelines, there's definitely opportunity right now for owner occupier buyers.”
Tax changes won’t shift the dial in hot owner occupier market
Since handing down the budget a week ago, the government has argued its changes to negative gearing and the capital gains tax discount will level the playing field for first-home buyers by reducing competition from investors.
Investors currently account for around one in every four homes purchased at auction according to Ray White, down from almost one in three mid last year.
But in some booming markets, investors barely get a look-in.
Auctioneer and co-founder of the Ray White Collective, Haesley Cush, said less than 2% of properties across the group’s five Brisbane offices had sold to residential investors over the last six months.
“They have been losing out to the overstimulated first-home buyers,” Mr Cush said.
“The general sentiment from the market is that the budget, specifically to deter investors, won’t do anything for Queensland prices,” Mr Cush said.
Get your realEstimate™
Track your property's value and unlock insights and data tailored for property owners.
In a housing update this week, economists at ANZ said the budget changes were likely to put modest downward pressure on home prices over the next five years, but the near term effect is more uncertain.
“What is likely is some degree of switching across the market, with different buyer cohorts and property types facing different near-term influences,” ANZ head of Australian economics Adam Boyton said.
“For example, one- to two-bedroom apartments in an area with a high investor share are likely to see softer price outcomes versus freestanding dwellings where the typical buyer is an owner-occupier seeking a principal place of residence.”
Ms Flaherty said supply will remain a key fundamental.
"There are certain markets where investor speculation has driven up prices, regional areas are a good example of that, and places like Townsville and Darwin, and maybe Hobart, which have been seeing a lot more investor demand," she said.
"But in most of our large capital cities, and Perth and Brisbane are the two key ones that come to mind, supply is going to be the number one problem that that dictates where home prices move."
Read more on our budget coverage:
- Experts weigh in: What the budget means for house prices, investment returns and rents
- Major changes to negative gearing, CGT discount in huge housing shakeup
- Property industry warns negative gearing, CGT overhaul could worsen housing shortage
- Budget wins: The changes putting money back in your pocket
- Investors to flock to commercial property following budget, experts say
- Chart shows how many investors could be better off under CGT changes
English (US) · 