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Foreign buyer activity falls to six-year low

Posted on 3 July 2018

Source:  Australian Property Journal

FOREIGN buyers continue to retreat from Australia's housing market, as Sydney's cooling market prompted NAB to downgrade its 2018 price forecast.

The major lender's latest Quarterly Residential Property Survey showed share of foreign buyers tumbled further in the December quarter to a 6-year low of 8.4% in new property markets, and a five-year low of 5.5% in the established markets.

"Clearly, the efforts of policymakers both domestic and offshore to stem the tide of foreign capital entering Australian property markets are bearing fruit," NAB chief economist Alan Oster said.

Meanwhile, first home buyers increased their share of sales in the housing market to almost two in five of new sales and around one in three in established markets.

The figures follow official data released a fortnight earlier that showed first home buyers had reached a five-year high in financing commitments, while broader investor borrowing growth was at its weakest level since the middle of 2016, on the back of APRA's macroprudential measures introduced early last year and state government imposts introduced in Victoria and New South Wales in the following months.

The proportion of each buyer category of new residential property is tipped to increase in 2018, except for foreign buyers. The share of foreign buyers in new property markets fell in all states except QLD, from 11.4% to 13.6%, and they remained most active in Victoria (13.8%). NSW market share slumped to a five-year low of 6.5%, and in WA it fell to 3.6%.

Foreign buyers accounted for a smaller share of sales in all states except for Victoria, up from 8.0% to 9.2% over the quarter, while it fell to a near five-year low in NSW of 5.3%. Just more than half of foreign property sales over the quarter were for apartments, ranging from 58% in NSW and 46% in Queensland. Houses accounted for just more than 31%, and redevelopment properties more than 16%.

NAB's house price forecast was chopped down from 3.4% for 2018 to 0.7% as the rate of correction in Sydney outpaced most analysts' expectations, with NAB describing recent price trends as "most concerning and prudential measures are likely to have the biggest impact".

Modest growth will continue at 0.8% in 2019.

Sydney prices are set for fall this year for the first time since 2011, by 2.4% and then 1.2% next year, headlining cooling across the major capital cities aside from the weak Perth market, tipped for a 0.7% rise in 2018 and then 1.2% next year.Hobart will lead growth in 2018 with 4.9%, albeit down from last year's 12.9%, followed by 1.7% in 2019. Melbourne's growth will ease to 3.7% and then 2.2%; while Brisbane and Adelaide are set for 1.9% growth before edging up and down respectively the year after.

The apartment market is tipped to underperform amid ongoing stock additions a soft outlook for foreign demand. Prices are forecast to fall by 0.9% this year, downgraded from 0.5% growth, and reduce by a further 1.8% in 2019.

Unit prices are expected to fall in Brisbane and Sydney over 2018 by 1.8%, while Melbourne will dip to the same level by 2019 with new supply additions.

"Naturally, any additional changes to government or prudential policy to address affordability or financial stability concerns are likely to have an impact on these forecasts," Oster said.

JLL's Apartment Markets report for Q4 of 2017 suggested self-regulation from developers in the face of tighter lending conditions and slower pre-sales rates has seen the number of projects under construction dwindle, as the market moved past the peak of supply.


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