New measures, including tightening the requirements for interest-only loans and property investments in self-managed super funds (SMSFs) in March, have reduced the number of investors purchasing property in Sydney by 20%. This reduction has helped cool the market, according to Douglas Driscoll, CEO of Starr Partners.
Investors comprised more than 50% of the entire Sydney market in 2016, but have begun to level off this year. Driscoll attributes the drop to the Australian Prudential Regulation Authority’s tightened macro-prudential measures.
“Many experts believe we shouldn’t interfere with the market and simply let nature take its course, but I feel that this laissez-faire approach would have had dire consequences. Although there are several factors at play, the excessive number of investors in the market was primarily responsible for the recent exponential price growth, so it is encouraging to see the further tightening is putting the brakes on the investor boom – which is what the measures were designed to do,” said Driscoll.
However, Driscoll believes Australians should not expect a market crash.
“I believe the market has now plateaued, which was inevitable as prices couldn’t continue to rise indefinitely but this shouldn’t be a reason to panic,” he said. “We must caution against the inevitable scaremongering, and maintain some perspective because we are looking at the aftermath of the investor ‘boom,’ but that doesn’t mean we are heading for a crash.”
Sydney’s house prices will remain robust for the short- to medium-term, and will naturally realign and readjust over time. “I remain very optimistic about the Sydney market. We will see a correction in prices but there are so many variables, making it difficult to forecast. Over the past 18-24 months, we’ve witnessed prices across most Sydney suburbs rise at the same pace, which is quite unusual, so we could see this start to adjust and become nuanced.”
According to Starr Partners, there has been a gradual shift this year amongst investors in Sydney, with many now beginning to set their sights on areas such as the Newcastle and Hunter regions.
“The APRA measures were designed to encourage lending institutions to be more prudent, not necessarily to solve the housing affordability crisis. With these measures having taken hold, I’m hopeful we will see the return of natural market equilibrium, with higher numbers of first home buyers and other owner occupiers, which we are already starting to see at our open for inspections and auctions,” he said.
“In saying that, investors will still be competing for property amongst these buyers – as they have always done. A bump in the road won’t be too impactful for experienced investors. Normally, they are very sensible in their approach, they have enough capital in their investment portfolio and carry a long-term view.”
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