Terry Ryder: Did Australia pass a prohibition law on property investment but forget to tell anyone?

Super funds are managing nearly 2 trillion dollars mostly invested in stocks and other related instruments. Probably a couple of trillions directly invested by Australians through managed funds and direct stock purchases . Why all this fuss about property?

By putting more restrictions on local investors and owner occupiers (lending limits on constructing new homes) with AUD going down, we are inviting overseas buyers to buy RE, how it is going to ease property prices in future.

 

As entertaining as this kind of thing is to read, house prices have surged 20% over the past year in Sydney.

Such a figure should make even the most committed property investor stop, take a deep breath and gather some sober unbiased facts.

It's not normal, not rational and could cause fairly big systemic issues if left unchecked.

APRA aren't here to spoil your party - but they are here to ensure the reduction in systemic risk. You can bet they're not making these moves on a whim.

So yes, fun to read but glossing over some of the facts.

 

How about the fact that prior to 2013 house prices in Sydney went up jack squat for 10 years. This is just a catchup. Dont get me started on how much real wages have gone up.

 

Does the gummint have to dictate where fhb can buy (or compete with investors in the d ree market).

I know plenty of investors who regularly spend in excess of $1.5m on an IP but this is FHB territory.

As for super funds either restrict borrowing to 70% or scrap residential from the cross hairs (as smsf is putting pressure on prices) & stricter rules on diversification.

 

To be honest i think the only thing Sydney investors are stopping to do now is count their equity gained and making plans how to reinvest it for further future gains.

 

Attitudes and laws relating to property investors are relatively tame in Australia. Try the UK where deductions are far more restricted and property investors are routinely described as parasites, slum lords, rent seekers and other terms that would be censored.

 

Politicians are actually over-represented in the residential property stakes, so you won't find them in a hurry to make changes, they'll likely do it kicking and screaming.
It's only by the weight of overall public sentiment that they will crumble.
That's kind of the problem really. In this effort to create so called "stable" investment policy. They sit on their hands and do nothing for decades until forced to do so and then you are forced to do more radical changes.
Rather than do more incremental changes along the way that not many people are going to say "boo" about.
They are also high income earners/high wealth individuals which again is why we have so many issues around tax reform. They just don't want to take away from themselves.

In any event I think its a bit easy to get over dramatic. The kind of investors/investment we are talking about while important shouldn't rank that highly on the governments priorities.

You can't really expect to see the kind of growth rates we have seen & reduction in the number of owner occupiers and think that there won't be some kind of blow off.

There is definitely a conversation to be had in regards to community expectations on foreign investment, home ownership rates, etc...at the moment its just one of the many things the current Government seems to remain quiet on. It feels like they are very much a rudderless ship and need to be more proactive in setting directions and community expectactions.

 

Back in the early 00's almost noone was buying a property in Sydney, BB. The market went pretty much sideways for a decent chunk of time....

Your graph doesn't prove much.

Another example of how your graphs and stats don't tell the whole story.

There was no noise about NG or investors pushing up prices back then.

 

Enjoying your thoughts.

 

They've already addressed home ownership.

Joe Hockey said; "Get a well paying job" to be able to afford to buy a house.

Truth, but that's not what folks want to hear.

 

I'm pretty sick of responding to your many false statements Bayview.

Here is a chart from Cameron Kusher (this was from May, so 2015 growth will be a little higher by now).

"Sydney home vals are +40.2% so far this growth phase, at same point from Dec-00 they were 60.2% higher"

You will notice that both times growth in investor finance shot higher and peaked was the strongest price growth periods, but don't let the facts get in the way of a good story.

No one was buying property... lol.

 

Maybe some of the NSW forumites can clarify the market over there around that time.

 

The fact of the matter is, there is strong demand for good housing all over major capital cities. Investors, home owners and many in between are all buying. If the demand from all segments of the buying population wasn't strong, doesn't matter how much investors 'push' up the price it simply wont hold. The fact is there is massive demand. Look what happened to Gladstone. Massive investment money into housing there with strong demand at the time and low supply saw prices to rise sharply, and then when supply outstripped demand, prices fell sharply in spite of massive amount of investors there.

This will not be seen in major cities simply because the demand is so strong from investors, home buyers, FHB and everyone else, all cumulatively pushing prices to a level that is mostly sustainable and wont crash like Gladstone simply because of the Supply/demand equation.

 

I believe the point Bayview is making is Sydney stagnated for a long time after 2003, not that literally no one was buying. In fact Sydney is only up 57% since September 2003 compared to Melbourne which is up 89% based on ABS data.

 

I wouldn't disagree with that, but not sure what relevance it would have in context of the disussion.

BTW here are Sydney property sales over that time. The fact is that investors do have an impact on prices, do pay silly prices at times, do chase prices into the peak, just like owner occupiers.

 

I don't think any one here is questioning whether investors have an impact on the market, of course they do. I think the real point here is that the focus on investors as the bogeyman is disproportionate to the impact investors actually have.

 

The relevance is this;

your graph showed investor activity around the early part of the '00's, and right up until just recently.

It certainly supports your argument that investors are out there buying if you look at the figures....but they always are, always have been.

But, you constantly push the barrow that investors push up prices and word it (like the media) that it is their/our fault..

That would be extremely hard to do if the market is flat, and the volume of sales is poor.

The volume of sales could be due to very few sellers, very few buyers or both.

When markets are flat, with higher interest rates etc; the investor volume would no doubt be down to it's normal level (or possibly lower) of approx 30% of all purchases.

The point is; you used a graph which as I said; doesn't describe the real story.

And as well as that; you are always blaming investors for much of the perceived lack of affordability; yet when noone is buying/selling; the silence about evil investors with NG perks - is deafening.

 

Sounds like sour grapes to me. The Government hasn’t actually done anything in regards to capital gains tax or negative gearing besides talking about ‘possibly having a discussion’. At the end of the day the only change that has occurred is APRA forcing the banks to hold more capital so they targeted investors to come up with the cash (exception of NAB who targeted anyone with interest only loans).

As far as honing on in foreign investors I personally think it’s a great thing. I’ve got no issues with foreign investment if they are purchasing new or OTP house because that directly generates jobs. However, purchasing existing housing (besides stamp duty) does little to nothing of benefit to Australia and should be stopped. Atm the FIRB is an underfunded toothless tiger.

 

I agree.

But the percentage is small in the overall scheme of things....a very small percentage of a very small percentage.

At it's absolute worst - right now - investor loans are up around 40+%. It is never anywhere near this as a rule.

And; that is investor loans; and not necessarily investor purchases as we've discussed....many refinances as we've discussed.

But if you listen to the media - and yourself - it is the complete other way around about who is the main offender in pushing up prices the most..

 

Personally, I wouldn't care if Mahatma Ghandi is pushing up prices. As long as there is strong demand to meet the prices on an ongoing and sustainable level (which there clearly is) then I'm more than happy. Yes markets will 'correct' here and there after booms, but generally it will be at a higher price point than pre boom and that is because there is 'support' or good demand at the new price level from all buyer segments involved.