There are more signs that lending to real estate investors may continue to fall, with market research from Westpac showing the public’s current opinion of real estate as an investment class has fallen recently.
According to the Westpac Melbourne Institute Index of Consumer Sentiment for March, only 14.7% of Australians nominated real estate as the “wisest place for savings,” down from 23.4% in December.
The index results back up claims made by CoreLogic RP Data research analyst Cameron Kusher, who last week said mortgage demand from real estate investors is likely to remain lower than previous years in 2016
"The constraints on investment lending have been extremely effective and have resulted in a swift and significant pull-back in demand, in fact the value of investment housing finance commitments in January was -20.0% lower than its April 2015 peak,” Kusher said.
“Although the CoreLogic Mortgage Index points to a rebound in demand over the coming months, we expect that growth in housing finance commitments will remain more subdued than what we saw over recent years,” he said.
But while the Westpac Melbourne Institute index shows real estate investors may be taking a break from the market, it appears to be the opposite for home buyers, with an increase among people who think current conditions suit buying a home.
“While there was a sharp deterioration in respondents’ views on real estate as a wise investment relative to December, assessments of ‘time to buy a dwelling’ suggest broader buyer sentiment may be stabilising,” Westpac chief economist Bill Evans said.
"The ‘time to buy a dwelling’ index increased by 5.4% from 99.3 in February to 104.7 in March. This Index is now 3.0% above its level in September but still 13.1% below its level of a year ago. The divergence between this index and views on real estate as an investment may reflect uncertainty around potential changes to taxation policy affecting negative gearing,” Evans said.
For those who do decide to enter the market in the near future, be it investors or home owners, Evans said they should have little concern that the Reserve Bank of Australia will trigger an interest rate rise.
“The Reserve Bank Board next meets on April 5. As we have been successfully arguing since June last year that we expect the Bank will keep rates on hold through 2016. Clear issues for the Bank will be the progress towards stability in the labour market and the value of the Australian dollar,” he said.
“Recent dollar strength has been associated with a more positive outlook for China and commodity prices and as such would not be grounds for a policy adjustment.”
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