Return of investors adds more heat to hot markets

First homebuyers fear getting priced out and owner-occupiers are taking unprecedented steps to ensure they don’t miss out on their dream homes, as the return of investors provides more sparks for Australia’s already-firing housing markets.

Crowded residential auction
Auctions are becoming increasingly exciting as properties sell for well above asking prices. Photo: Ray White Group (Image source:

First homebuyers fear getting priced out and owner-occupiers are taking unprecedented steps to ensure they don’t miss out on their dream homes, as the return of investors provides more sparks for Australia’s already-firing housing markets.

The latest lending data from the Australian Bureau of Statistics, released at the start of this month, showed the value of investor lending for residential property hit $6.94 billion in February, a 31 per cent increase year-on-year.

Meanwhile, home values continue to rise in virtually every Australian housing market, with CoreLogic data in March showing the fastest rate of growth in more than 30 years.

Much of Australian housing markets’ rise could previously be attributed to owner occupiers, with investors largely staying cautious and on the sidelines amid the uncertainty of the previous 12 months that was wrought by the coronavirus pandemic.

But Canstar’s Steve Mickenbecker said investors had clearly become convinced that the price growth  was likely to be a lasting trend.

“The market looks set for a repeat of 2017 with investors and first home buyers competing for what housing stock is available," Mr Mickenbecker said.

“This is still a very hot property market. Real estate stock is racing off the shelves and estate agents are on the streets soliciting new listings with the enticement of prices homeowners have never dreamed of.”

In addition to making offers at well above the asking price, Mr Mickenbecker said buyers were going to new lengths to ensure they don’t miss out on properties.

He said some buyers in Sydney were reportedly either ignoring the findings of building and pest reports or not undergoing inspections entirely in an effort to secure their dream home.

“The pace and magnitude of the property market recovery will have caught policy makers by surprise,” Mr Mickenbecker said.

“Low interest rates and incentives have proven to be a potent mix in kick-starting the recovery and there is no obvious shock on the horizon likely to be more than a speed bump.”

Proptech platform Archistar’s latest National Housing Report showed capital city activity continued to surge over March and into April, with price growth pushing towards record highs in key locations.

And while sellers have come to market in numbers to take advantage of the strong buyer competition, weekend auction markets continue to record unprecedented results, with clearance rates remaining above 90 per cent in most capitals.

Data from Ray White Group showed new listings across its agency network shot up by 61 per cent in the last month, but total listings still remain 26 per cent lower than the number of properties available for sale two years ago.

The extra stock coming to market is being absorbed buy buyers, with no signs yet emerging of an easing in price growth or transactional activity. 

However, Archistar’s chief economist Andrew Wilson said higher prices would likely act to dampen affordability, and put the brakes on buyer activity sooner rather than later.

“Bank lending conditions are as usual likely to remain rigid under the watchful eye of regulators, placing a ceiling on borrowing capacity,” Dr Wilson said.

“The reduction or expiration of government support policies directed to housing markets will also act to dampen home buyer activity.

“Home price growth however will certainly remain strong to solid through the remainder of 2021, with an easing of activity rather than a sharp correction as experienced in other similar strong cyclical upturns with no prospect of a significant increase In Interest rates to quell demand.”

First homebuyers to battle

Recent research from Finder showed 53 per cent of 1,028 first homebuyers surveyed had bought sooner than they had previously planned, largely due to the record-low interest rates on offer.

But even if price growth moderates, Australians rising house prices means entering the market will be extremely challenging for first homebuyers in coming months.

Finder’s First Home Buyers Report 2021 showed the national average house deposit hit $106,743 in January, meaning first time buyers needed more than a decade to put together the funds necessary to buy a home.

Finder home loans expert Sarah Megginson said amassing six figures for a deposit was a major hurdle for first time buyers.

““Prospective buyers are being stumped by a supercharged property market, which isn’t showing any signs of slowing down just yet,” Ms Megginson said.

“Low interest rates have made it cheaper to pay down a mortgage, but this has pushed up property prices, making it even harder to save for a deposit.”

Ms Megginson said first time buyers struggling with saving should consider rentvesting, buying with friends or family or finding a guarantor to provide additional security for their loan.

Unsurprisingly in that context, another key finding of the survey was that 79 per cent of respondents had bought ‘fixer-uppers’, and were planning to renovate.

Around 1 in 5 planned to renovate immediately after buying, while 30 per cent said they would do so in the first year of home ownership.

A further 23 per cent said they would do a makeover within five years, while 5 per cent said they would likely do a renovation six or more years in the future.

Ms Megginson said the renovation boom was an indication of the creative tactics first homebuyers were employing to get into the market.

“In a hot market, it's not always possible to buy your ideal home, let alone your dream home,” Ms Megginson said.

“What some first home buyers are finding is that their best chance to get on the property ladder is by purchasing a 'fixer-upper' in a suitable suburb."

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