Property purchases down as interest rate shocks hit
Rising living costs and interest rates are hurting housing sales, with a sharp downturn in loans and investor lending.
ASPIRING homeowners are pulling back on property purchases as the cost of living continues to climb, with warning that demand is set to soften even further.
Loan commitments for Australian properties fell by 6.2 percent in the March quarter, according to real estate analysis from Cotality and Australian Bureau of Statistics figures.
Investor lending in the ACT declined by almost 17 percent last quarter, compared with a national average of 5.3 percent.
NSW fell by 6.3 per cent for investor lending, while South Australia and Tasmania experienced growth of 4.7 per cent and 8.8 per cent, respectively.
Despite this, investors accounted for more than 40 per cent of the lending value nationwide.
Much of the activity was concentrated in capital cities.
The Reserve Bank raised the cash rate twice in the March quarter to 4.1 per cent, which decreased buyer confidence.
At the bank’s latest meeting in May, the rate rose again to 4.35 per cent.
The Cotality report said the third hike could exacerbate the sector’s downturn.
“Demand is likely to soften further, as the full impact of the interest rate tightening, particularly the hike in May, has not yet been felt. There is the possibility,” the report said.
“At the national level, the housing market is already on the cusp of a downturn, with dwelling values already contracting in Sydney and Melbourne while growth is slowing in the mid-tier capitals.”
First-home buyer lending also declined in all jurisdictions except the ACT and was expected to decline further.
Nationally, first home buyer lending fell by 4.3 per cent for the quarter, with NSW declining by 4.1 per cent and Victoria by 4.5 per cent.
The biggest decline was experienced in the Northern Territory, which fell by 20.6 per cent.
“Victoria continues to lead first home buyer lending activity as a share of the total, with Melbourne’s relative affordability advantage over other cities, as well as tax policy settings that discourage investors, contributing to this trend,” the report said.
Consumer confidence has plunged since the start of the war in Iran, given rising material costs and stock market fluctuations.
Reflecting the same trend as other markets, property values in most capital cities rose in the March quarter, the Cotality data showed.
Perth led with a 6.8 percent rise, followed by Brisbane at 4.7 percent. Sydney and Melbourne were the only cities to see a downturn in values, at 0.9 percent and 1.5 percent, respectively.
Concern about changes to negative gearing and the capital gains tax discount in the federal budget are also likely to make buyers more hesitant.
