Despite the implementation of macro-prudential measures in Australia whereby APRA will aim to cap investor lending credit growth at around 10 per cent per annum, there are three other forces which may conspire to see 2016 being a strong year for property.
1. Firstly, Assistant Treasurer Josh Frydenberg has reportedly flagged that there will no banning of SMSF property borrowing, which could come as something of an upside surprise for capital city property markets, although those without substantial deposits may find real estate investment via their SMSF a tough proposition.
2. Secondly, does anyone else think that interest rates are on the “long, slow march to zero“?
I can’t predict the future, of course, but put it this way – I wouldn’t be betting against it!
The cash rate futures implied yield curve suggests that markets area already looking for another interest rate cut to 1.75 per cent by the second half of 2016.
It’s hard to know where to start with commodity prices crash
The iron ore and coal correction, of course, has been one for the ages.
Crude futures have hit upon a deadly slick.
“Dr. Copper” is testing 6 year lows and toying with financial crisis depths while lurking below US$2.30/lb.
Precious metals are miles below their peaks…and on the list goes.
Ordinarily one might say that this will be bad news for property markets and investor sentiment, yet realistically with mortgage rates falling towards record lows and cash in the bank paying essentially nothing worthwhile after inflation, where else are Aussies going to invest their money?
Into our tanking and resources-heavy stock market?
Hmm, not so sure about that.
3. Thirdly, with APRA targeting investor loans banks and lenders are likely to go all in on targeting owner-occupier lending.
HSBC are already now offering variable rate mortgages from 3.99 per cent, with is just unbelievably cheap.
We might expect to see other banks to follow suit.
CoreLogic-RP Data‘s index shows that Sydney home values are up by 1 per cent in first three weeks of August alone and a stonking 18.2 per cent over the past year.
It’s turning into a monster property boom, with Sydney dwelling values now up by more than 50 per cent since 2012.
With Sydney inching closer to its market peak, investors are increasingly shaping up to scope out Brisbane for better value, with investor lending on a 12mMA basis now tracking at its highest level since April 2008.
Sure, APRA’s investor lending crackdown will jam a stick in the spokes for a while, but meanwhile Queensland owner-occupier lending has also ghosted past five year highs on a 12mMA basis, after a subdued half decade.
And remember the Queensland figures are being dragged down by any number of mining towns and regions which are experiencing negative demand i.e. recessionary conditions.
Brisbane could be the one to watch in 2016.