The latest results from the Digital Finance Analytics Household Surveys, show that whilst there are segmental movements in play, overall demand for property remains intact, despite rising mortgage interest rates and concerns about stalling income growth.
Results from the latest 52,000 survey show that first time buyers are being encouraged by the more generous first home owner grants on offer in several states. On the other hand, the relative benefit of home purchase relative to renting has reduced.
The biggest changes in the barriers first time buyers are experiencing relate to the availability of finance, whilst concerns about future interest rate rises, and rising costs of living reduced a little compared with our May results. Overall first time buyer demand is up.
Turning to property investors, the barriers to purchase are changing with a rise in those concerned about rising mortgage interest rates and availability of finance.
The reasons to transact have shifted, with a significant rise in those saying they were driven by tax benefits (both negative gearing and capital gains) whilst there was a fall in those looking to appreciating property prices and low finance rates. Overall, investor demand is down a bit.
Another important group are those refinancing. After a strong swing in 2016 to get a better loan rate, there has been a rise in those seeking to reduce their monthly repayments.
So plotting the change of transaction intention over the next 12 months, we see a significant fall in both portfolio and solo property investors, but a rise in first time buyer purchasers expecting to transact.
Finally, we see that in relative terms there is a fall in the proportion of property investors expecting to see home prices rising in the next 12 months, whilst first time buyers are a little more positive, and there has been little change in expectation across our other segments.
Putting all this together, we think demand for finance, and for property will remain quite strong, and on this read, it is unlikely home prices will fall much at all in the major eastern state markets. Other states are more at risk of a fall, which once again underscores the diversity in the market across Australia. As a result lenders will still be able to write more business, though the mix is changing.
