A big factor in the recent weakness in the Sydney residential property market is that investors are less bullish about future house price growth, according to researcher Digital Finance Analytics.
In its latest research on the residential property investment market, DFA reports a fall in the number of investors who are intending to transact (either buying or selling) in the next 12 months.
DFA says that in 2015, 77 per cent of portfolio investors (owning more than two properties) and 49 per cent of “solo” investors were intending to transact. Today those numbers are down to 57 per cent and 31 per cent respectively.
According to CoreLogic’s latest report on Australian dwelling values, Sydney house prices fell by 0.1 per cent in September – the first month-on-month decline for the city in 17 months. Sydney values were up 0.2 per cent in the September quarter and up 10.5 per cent for the year to September 30.
The national capital city average was up 0.2 per cent for the month, 0.5 per cent for the quarter and 8 per cent for the year. Melbourne and Hobart had the biggest increases, while Darwin and Perth suffered falls.
CoreLogic head of research Tim Lawless says: “The slowing in the combined capital growth trend is heavily influenced by conditions across the Sydney market, where capital gains have stalled.”
DFA principal Martin North says: “Factors involved in the transaction decision include appreciating property values, access to low-cost finance, higher returns that alternative assets and tax breaks.”
“Back in 2015, appreciating values was cited by about one-third of investors as their reason for transacting. In the most recent survey it was cited by only 10 per cent of investors.
“There is also increasing difficulty getting finance. Twenty-nine per cent said it was a barrier to investment.”
DFA says that offsetting the bearishness of investors, the proportion of “down traders” intending to transact has been rising, and there is also increasing demand from “first time buyers”.
“But overall, home price growth expectations are lower and trending down,” DFA says.