Property purchases down as interest rate shocks hit
As the cost of living continues to rise and the demand for warnings softens further, those considering homeownership are withdrawing their property purchases.
Loan commitments for Australian properties fell 6.2 per cent in the March quarter, according to property analysis from Cotality and Australian Bureau of Statistics figures.
Investor lending in the ACT fell by almost 17 per cent last quarter, compared to a national average of 5.3 per cent.
While NSW fell 6.3 per cent in investor loans, South Australia and Tasmania recorded growth of 4.7 per cent and 8.8 per cent respectively.
Despite this, investors accounted for more than 40 percent of loan value nationwide.
Most of the activities were concentrated in the capital cities.
The Central Bank increased the cash interest rate twice in the March quarter to 4.1 percent, reducing buyer confidence.
At the bank’s last meeting in May, the rate rose again to 4.35 percent.
The third increase could worsen the downturn in the sector, the Cotality report said.
“As the full impact of the tightening in interest rates, especially the increase in May, has not yet been felt, demand is likely to soften further. There is a possibility,” the report said.
“At a national level, the housing market is already on the verge of a downturn, with house values already contracting in Sydney and Melbourne, while growth is slowing in mid-tier capitals.”
First home buyer loans also fell in all regions except the ACT and were expected to fall further.
Nationally, lending to first home buyers fell by 4.3 per cent in the quarter, with NSW falling by 4.1 per cent and Victoria by 4.5 per cent over the same period.
The biggest decrease was in the Northern Region with 20.6 percent.
“Victoria continues to lead in first home buyer lending activity as a share of total, with Melbourne’s relative affordability advantage over other cities and tax policy settings deterring investors, contributing to this trend,” the report said. The statement was included.
Consumer confidence has fallen since the beginning of the war in Iran due to rising material costs and stock market volatility.
Property values in most capital cities rose in the March quarter, Cotality data showed, reflecting the same trend as other markets.
Perth led the way with an increase of 6.8 percent, followed by Brisbane with an increase of 4.7 percent. Sydney and Melbourne were the only cities to lose value by 0.9 percent and 1.5 percent respectively.
Changes in negative gearing and concerns about the capital gains tax cut in the federal budget will also likely make buyers more hesitant.
