Property Investors Rush Out of the Market

Property is something that everyone can talk about. There are the self-proclaimed experts that give advice to anyone and everyone willing to listen. And then there are the property tycoons who own 10 or more properties, but for some reason don’t feel like they have to boast about their success.

Some believe property will fall drastically in the coming future. And others believe it’s the ultimate asset to create wealth.

Regardless of the level of your expertise, property is a topic almost everyone has an opinion on. Of course some opinions are more valuable than others. But bottom line, no one knows with 100% certainty where property prices will go.

There is one thing we can be sure about. Banks are tightening their lending standard. An article in the Sydney Morning Herald this morning highlighted the drop in loans to property investors for April.

Apparently tight lending regulations was ‘working’, stated the article. The monthly total of new investor loans was just under $11.3 billion. This was down from March’s $11.9 billion. It was also the lowest level since June 2014.

But is this the right course of action? The Reserve Bank of Australia has made a concerted effort to calm the ‘hot’ property investment market. Yet their effort will only work if it is in fact investors hiking property prices.

In a previous article I talked about how a larger number of investors could keep prices stable. And in some cases it could even lower property prices. I know it might sound strange. But in some cases more investors equals stable prices.

Let me explain.

If there are more property investors in the market, what happens? The Australian Government starts by channelling more money to building more dwellings (mostly apartments). This not only increases the supply of properties (causing prices to stagnate or decrease) but it also gives the construction industry more jobs.

So effectively it’s a win-win-lose scenario. First home buyers have the benefit of property prices stagnating, so they can save up for a deposit. Construction workers get jobs. But property investors have to sit and wait longer for property prices to appreciate.

So next time you hear someone say that property prices are unaffordable (that’s another heated topic) take it with a grain of salt. Many times it could be investor, not willing to pay too much, that keep downwards pressure on prices.

Härje Ronngard,
Junior Analyst, Money Morning

PS: Most people think great deals in Aussie property are already all gone. This is the worst attitude to have. Why would you take financial advice from a friend or some self-proclaimed guru?

Instead why not do your own research and take control of your financial future. But where do you start?

If you’re interested in property then check out Money Morning’s property expert, Callum Newman’s report ‘Australian Real Estate Game Plan’. In Callum’s report he’ll tell you the eight letter word that really drive property values. It’s the ultimate guide to help you start your future property plan, and it’s free!

To get your copy of Callum’s report, click here.

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

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