The Property Market Enters a New Phase

Four reports came out this week that show the gold-rush days are over and that the property market is becoming more sensible – and still with some strength.

On Monday Housing finance data for was released by the Australian Bureau of Statistics (ABS).  According to the data, the total value of housing finance commitments for February was $32.8 billion which was 2.6 per cent higher over the month and 6.0 per cent higher year-on-year.  Although the value of housing finance commitments is higher over the month and year, it is currently 2.7 per cent lower than its peak of $33.7 billion in August 2015.

The $32.8 billion worth of housing finance commitments in February 2016 comprised $20.9 billion in owner occupier lending and $11.9 billion in investment lending.

Source:  RP Data Corelogic

As the graph above shows, there is a clear separation between the still upward owner-occupied market and the plateauing investor market.

But on Wednesday, the ABS’ lending finance data showed that lending for investment housing was still very present, and lifted to 35.3 per cent of all secured housing loans. Investment lending still has momentum.

Then, on Friday, the Reserve Bank of Australia issued its half-yearly Financial Stability Review where it flagged risks to banks that lend to property developers – in markets that are perceived to be peaking.

Increasingly, the residential property market seems to be flagging. But the question is can it remain like the Sydney Swans or Melbourne Storm. Their once-great teams may now be past their peak, yet over the past few years they have put in good if not stellar performances.

Hearteningly, the ABS also produced unemployment data which showed unemployment had dropped to 5.7 per cent. Along with interest rates, unemployment is seen as one of the key drivers of the property market.

Source: https://www.alankohler.com.au/

My coal-face experience shows a cooling, but still healthy, property market. None of my clients have yet experienced property valuations below an agreed contract price.

And I am currently arranging a $13m loan to finance an apartment development in Sydney which is completely pre-sold

The Swans have only missed the finals in three seasons since 1995 – and have won two grand finals. Sure they have not had the dominance of a Barcelona or The All Blacks, but I would be happy with those returns.  Why not the same for property?