NSW investors contending with mixed data signals, persistent supply crunch
Property affordability appears destined to worsen in New South Wales as interest rates are cut and measures tackling housing supply prove inadequate.
One of the major drivers in the market is the availability of money.
If buyers can service higher debt levels, then they’re able to push the price of property up. It happened with the last interest rate cut and if the expectations of further rate cuts this year come to fruition, it will likely happen again.
Cotality research shows Australian housing values rose by 0.6 per cent in June, the fifth straight month of growth. Sydney house values were up 1.1 per cent for the June quarter and the median dwelling price in the city now sits at over $1.21 million.
It’s a staggering figure which highlights our affordability problem. With prices rising faster than household income, the affordability problem is set to get even worse.
Prior to its release, the NSW Budget was pitched by the Government as being focused on housing. It is widely understood that the shortage of homes is the main reason for the housing crisis. Economics 1:01; supply and demand.
The Government’s budget talk hasn’t been matched by its walk. Once again overpromising and underdelivering, it also demonstrated that Government does not even understand the problem.
At face value, the NSW Government’s commitment to act as guarantor of up to $1 billion worth of new housing projects, which it claims will bring forward the construction of up to 15,000 extra homes over the next five years, is a positive step.
Under the scheme, Government will guarantee a set number of homes to help mid-tier developers secure finance they need to commence projects that fulfil certain criteria. Government will then commit to the purchase of unsold homes in these projects at a discounted rate, to be used for affordable or social housing.
It’s something. But even if it works exactly as planned, we’re still playing catch up.
One of the major barriers to new housing supply is approval delays. For too long and in too many instances, new housing projects have been held to ransom by consent authorities.
Longer delays equal larger costs. This is one area in which Government could channel its focus. Approval timeframes can take longer than build timeframes. It’s untenable and all the while, the gap between demand and supply widens.
So, in this competitive environment for property and at the start of a new financial year with the housing undersupply entrenched, where do investors sit?
Are investors really returning?
Recent reporting on investor activity has been contradictory and therefore confusing.
There have been reports of investor loans increasing. High rents as a consequence of tight rental vacancy, as well as lower interest rates, are cited as the key reasons for the supposed increase in investment.
Yet on the ground, agents paint a different picture. Each week REINSW member auctioneers are selling investor grade stock. More often than not, these properties are being purchased by owner-occupiers, with investors remaining quiet.
It’s difficult to reconcile reports of investor activity surging while NSW agents say investors are dormant.
Where does the truth lie?
Data can be interpreted in numerous ways. There may also be some other factors at play, as buyers get creative in order to rise to the affordability challenge.
Rentvesting is apparently gaining momentum. People keen to enter the market might find it preferable to do so while still living with mum and dad. There’s a view in the market that approaching a lender for an investment loan might enable a buyer to access more finance than they otherwise would if it were for owner-occupier purposes.
Either way, buyers appear to be getting creative, which may be a factor in the apparently conflicting data.
But is it enough to skew the numbers? And could investor creativity contribute to the steadily increasing property prices we’ve all become accustomed to?
Let’s see what FY26 brings.
