George Orwell and the Australian Property Market

The Winners and Losers in a New World

School was a happy time for me, but I found Animal Farm a rather scary book.  And, while I am stretching it a fair bit, there are some revolutionary changes happening in our property market -which relate to Orwell’s classic.

Four legs good.  Two legs bad.

Owner-occupiers good.  Investors bad

Lenders are now making it much easier for owner-occupiers to get a loan (and conversely much harder for investors).  As a result, according to Corelogic, the average investor loan is now 0.5 per cent higher than its owner-occupier equivalent.

And this week, AMP announced that the maximum it would lend to investors would be 50 per cent of a property’s value.

Four legs good.  Two legs bad

Principal and interest good.  Interest-only bad

Concerned about the growth in interest-only lending, the regulator has told the banks that they should limit their new interest-only lending to 30 per cent of total lending.  As a result, the banks are scrambling to choke off the growth in interest-only loans.

Most banks are turning off the interest-only tap by increasing rates. This week NAB announced a 0.35 per cent rise in interest-only loans, with Westpac close behind at 0.34 per cent.

Four legs good.  Two legs bad

Canberra good.  Brisbane Bad

According to the Australian Bureau of Statistics the first quarter of 2017 showed the strongest price growth was in Sydney (14.4 per cent) and Melbourne (13.4 per cent), though it seems highly likely that Sydney’s annual growth rate is on a downwards trajectory from here.

Meanwhile Adelaide prices rose by 5 per cent higher over the year, and Canberra recorded annual growth of 8.9 per cent.

Most experts believe that we are getting to the top of some East Coast markets – but there are opportunities elsewhere.

Four legs good.  Two legs bad

First Home Owners Good.  Property Portfolios Bad

Across the country governments are stacking the cards in favour of first time buyers.  Where once it was investors who held the aces, now its first home owners who can out-muscle the competition.  Initiatives announced have included stamp duty reductions for first time buyers and some boosts to the First Home Owners Grant.

Orwell’s classic conveys a nightmarish totalitarian World – but it does not have to be that way.  If you are a Sydney property investor looking for interest-only finance, you may not necessarily get done over with your finance.  Similarly, if you are a first home owner in Geelong, you may not necessarily be quids in.

To avoid a nightmare, talk to some experts and go in with your eyes wide open.