Property investor activity is crushing the great Australian dream of owning your own home, leading more and more would-be home owners to keep renting, a new report shows.
Strong capital city property prices and a recent surge in investor demand, driven by low interest rates, were locking first-home buyers out of the market and making renting more attractive than buying, according to a new report from credit ratings agency Fitch on Thursday.
Home ownership levels had fallen from 70.7 per cent in 2000 to 67.5 per cent in 2012, the report said, with official figures showing first-home buyer numbers hit record lows in 2014.
“The growth of the housing investor market has largely been at the expense of the first-time buyer,” the report said. “There is little doubt that first-home buyers are being priced out of the market.
“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.”
Some property analysts and economists have previously denied claims that investors are locking first-home buyers out of the market, arguing that they shop for different types of property.
But Fitch says it’s a trend that’s being seen around the world.
“Tight credit availability and stretched affordability should continue to lead to falling home ownership levels in many countries around the globe,” the report said.
“A generation of first-time buyers is largely priced out of the market.”
Investor loans in Australia now accounted for 50 per cent of new loans, the report said.
But rising house prices in Sydney and Melbourne were now putting pressure on rental yields, making it likely that investor interest in housing will drop off in 2015, contributing to lower house price growth.
“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.
Fitch expects Australian home price growth to ease to four per cent in 2015, from seven per cent in 2014.
“After 15 per cent 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. AAP