Investors are taking half of all mortgages issued to home buyers in Australia and are pricing middle class and young families out of the property markets, credit ratings agency Fitch concludes. As a result, the number of first-time buyers entering the market hit record lows in 2014.
“The growth of the housing investor market has largely been at the expense of the first-time buyer. There is little doubt that first-home buyers are being priced out of the market,” according to the report.
Australia’s homeownership rate has been continuously falling, from 70.7% in 2000 to 67.5% in 2012, the report says. “The same trend is being observed around the globe. Tight credit availability and stretched affordability should continue to lead to falling home ownership levels in many countries,” the report said.
“Fitch expects investor demand to remain high in Sydney and Melbourne, so long as interest rates remain at the current low level and so long as the tax incentives to invest in property remain.”
However in 2015, Fitch predicts housing investment to cool slightly. Rising home prices in cities like Sydney and Melbourne will dampen investment because of pressure on rental yields, slowing price growth. Fitch expects Australian home price growth to come down to 4% in 2015, from 7% in 2014.
“Housing investor sentiment is fickle and if alternative asset classes offer better returns we would expect investor interest in housing to fall with some follow-through impact on demand and property prices,” the report said.
“After 15% growth in the past 18 months, we believe Australian house prices are near an affordability ceiling and growth is expected to moderate in 2015-16,” the report said.
This article was republished with permission from Global Property Guide.