Author: Martin North

We continue our series on the results from our latest household surveys. Today we look at those seeking to trade up, and trade down. These are important segments, as they are both shaping the market.

Looking at up-traders first, these are households looking to sell to buy a larger property. Over one million households fall into this category. There are a number of reasons why households might do this, more space is the single most significant, then comes consideration of the investment potential of their property. Other reasons include life-style changes or job changes. From a trend perspective, the investment aspects of property have become slightly more important.

Turning to down-traders, there are about 1.2m households looking to sell with the prospect of buying a smaller property, and/or an investment property. Increased convenience is the most significant reason to move, followed by the wish to release capital for retirement, and next, a switch to an investment property. Other reasons to trade down include illness, death of spouse, and unemployment. From a trend perspective, the demand to release capital for retirement is stronger, whilst unemployment is less significant now. Down traders are less bullish on future property price growth than other sectors. Only 30% of down traders think prices will rise in the next 12 months, whereas across the market 60%+ of households think prices will rise further in coming months.

We can look in more detail at households over 60 years. The largest group resides in New South Wales, then Victoria.

Within this group, we find a considerable number of down traders, most of whom are looking to down shift into a smaller place for owner occupation, although some prefer investment properties.

We can look at where and what they want to buy. We find that the most significant demand from down traders over 60 years is for property closer to the city, and that more than half of these households prefer a unit. About 6% would consider property in a retirement village setting.

We find that certain factors will strongly influence over 60 down-traders considering a retirement village. Here are some of the most important. Price is the most significant factor, followed by access and facilities.

Next time we will look at investors.

We continue updating our findings from our household surveys. Today we look at households who desire to enter the market. We highlighted yesterday that there are more people excluded from the market, but what of those who would like to buy? We start with a summary of households by type. This is the national picture, by segment:

Here is the data which highlights the large number of want to buys, and the relative small number of first time buyers (defined as those actively seeking). We will discuss the other segments later.

Looking at the want to buys, we see the most significant barrier is the level of house prices, in trend terms this is becoming an even more significant issue. Whilst fears of unemployment have fallen a little, concerns about future interest rate rises are up a little and costs of living continue to be a barrier for some.

Turning to first time buyers, we see high house prices stand out as a constraining factor, whilst finding a place to buy has eased, a little.

We found that there has been a swing towards units, and further from the city. We also see a rise in those who are unsure of what or where to purchase. This is a national picture, and there is considerable state variation which I won’t cover here.

We see some first time buyers continue to consider an investment property alternative, as a way to at least get on the property ladder, even if its in an area in which they do not wish to reside. They are most likely to consider an investment property around edge of the city. Even here they may well be competing with overseas investors!

Finally, today, we look at which segments are most likely to use a mortgage broker. First time buyers are a little more likely, and well over 50 per cent would consider a broker.

Next time we will look at some of the other segments.

Today we start a series on our updated household surveys, which will in due course feed into our next edition of the Property Imperative, due be released later in the year. The current edition, is still available, but there are some significant changes in household intentions since then.

We run our surveys continually, and so incorporate new data each week. The results we will discuss relate to data up to 13th June. We start by looking at the mix of households who are property active and inactive. We define property active households as those who either own, or intend to own a property to live in, or are investing in property, or both. We find that 25.88% of households are inactive. These households will rent, live with family or friends, or have other housing arrangements.

Looking at the inactive status trend, we see that more households than ever are excluded from the property market.

We also see some state variations, with the highest proportion of inactive households founds in Tasmania and South Australia, whilst households in Western Australia, then New South Wales and Victoria have a lower mix of those inactive. That said, the absolute numbers are still increasing in these states too. This is the continuation of a long term trend.

So, next we turn to the active households and begin to look at the more detailed data. We start by looking across our segments, later we will dive more deeply into specific segmental analysis. We start with saving activity trends over time. We see that first time buyers (defined as those seeking to buy for the first time) are still saving hard, but other segments are less inclined or less able to save to purchase a property. Want to buy households (defined as those who would like to buy, but who cannot), are less likely to save than in 2013.

Looking at transaction intentions over the next 12 months, we see a significant fall in those investors expecting to enter the market. First time buyers are still being squeezed out, and those seeking to refinance an existing loan are now slightly less likely to transact. Down traders are still active (these are households seeking to sell to buy a smaller property, to release capital, or other factors), though we detect a slowing here too. Therefore we predict that demand for property will decline from recent levels in coming months. This is especially the case in New South Wales and Victoria.

Looking next at borrowing intentions, we see that property investors and up traders are most likely to seeking funding. First time buyers are needing to borrow more also, though as highlighted above they are less likely to transact. Therefore we expect to see some ongoing demand for investment housing funding, but at lower levels than those we saw last year. Funding for owner occupation will likely grow more slowly.

Finally, today we look at house price growth expectations. Overall expectation are still quite bullish, but we see a general small fall in the households who believe that house prices will rise in the next 12 months. Down traders are the least bullish.

So our initial findings highlight that we expect momentum in the property market to ease in coming months, even before any interest rate rise. In fact we think that the fall in momentum may postpone potential rate rises, and may begin to turn expectations towards a rate cut, especially if the proposed budget cuts are passed, and the international political scene gets more unstable.

Next time we will start to look at segment specific factors, as each segment exists in its own micro market, and dynamics are quite different.