Report drew from four primary market indicators
Three months ago, the government released a new housing package to deliver a more sustainable housing market and support first-home buyers (FHBs) into homeownership. Now, CoreLogic’s latest data helps shed light on if new housing policies are delivering on the government’s promises.
The report suggests there have not been major changes to the market despite the bright-line test extension and tapered removal of interest deductibility from other measures, such as higher deposit requirements.
CoreLogic head of research Nick Goodall said it was still early to disentangle the government’s bright-line and interest deductibility changes. However, he expects tax changes to clearly curtail purchases of existing properties by mortgaged investors as more time passes.
“This could be heightened by the incentive for investors to look at new-builds if the government allows interest deductibility on these properties for an extended period,” Goodall said.
“First home buyers (FHBs) have been keen to buy new properties of late, so this diversion of investors’ focus from existing property to new-builds could have an unintended negative consequence on FHBs, who have already been struggling under the weight of rapidly rising home values and growing affordability constraints.”
Read more: Government seeks feedback on exemption of new builds from new tax rules
CoreLogic drew on four primary market indicators during its analysis:
Weekly flow of new listings
CoreLogic’s listings data shows that new listings have not spiked since the announcement of the housing policy changes, so existing landlords do not seem to be in a rush to exit the market.
“Instead, they are taking their time and assessing their options. To us, the large bright-line tax bill that would await some landlords if they sold straight away, and also the lack of ‘trusted’ alternative investment options, are key factors here,” said CoreLogic chief property economist Kelvin Davidson.
Annual percentage change in rents
CoreLogic expects some landlords to raise rent off the back of the housing policy changes, but it seems they are still waiting for the right time to do so.
“The stock measure is still just ticking along at normal rates, and although the flow measure has accelerated, it’s hard to extricate how much of that might be due to landlords wanting to recoup costs versus genuine supply/demand pressures, versus perhaps, even some kind of ‘catch up’ after last year’s COVID-related rent freeze,” Davidson said.
Read more: Barfoot data reveals impact of housing reforms on prices and sales numbers
Valuation volumes
Although many experts claim to see signs that sales volumes have eased, CoreLogic had a different take.
“Our data on the trend for the volume of valuations ordered by banks indicates that borrower/valuations activity, which is an early indicator of demand, is still pretty solid,” Goodall said. “At the same time, it’s the shortage of listings/choice that’s probably playing a role in limiting agreed sales, too.
“In terms of prices, there is some evidence of a slowdown, but not much. Using data from our very latest unconfirmed sales records, the premiums buyers are paying over and above CVs have eased back in the past month or two, but not dramatically so.”
Mortgaged investors’ share of purchases
CoreLogic pointed to buyer mix as the only key indicator that has shown obvious signs of change in recent months – with its Buyer Classification series showing that mortgaged investors’ market share has dropped from 29% across January to March, as a whole, to only 25% in May.
“But even then, it’s more likely that this is actually due to measures other than the March tax changes, such as the fact that investors have been required by lenders to stump up a 40% deposit for the past five to six months now,” Davidson said.
“Compared to the last time, investors were required to have 40% deposits (from October 2016 to January 2018), the evolution of mortgaged investors’ market share has so far been similar in both cycles, but with the extra attention investors are getting this time around, there surely has to be a chance that their share will ultimately fall below the previous trough.”
