Streets Ahead : Streets Ahead Edition 12
13 Consumers generally purchase property for two reasons; as a place to reside, in the case of owner occupiers, and/or with a view to obtain capital growth. Speculation fuelled by the media of a housing bubble, an upcoming national election, proposed changes to negative gearing policy and recent changes in lenders’ policy relating to investment loans are some of the likely drivers of declining consumer confidence. However, the Australian economy is stable, with low interest rates and steady unemployment. In addition, the Australian mortgage industry is strong with high quality underwriting practices and focussed regulatory oversight on the industry. Fears about what happened in overseas property markets like the US can also have an unnecessarily adverse effect on Australian confidence, and as it stands today there are structural differences in the market such as serviceability standards, borrower recourse and a significant demand for housing in Australia, particularly in major cities like Sydney. Tim Brown is one such expert who believes in the fundamentals of the Australian mortgage market: “I’ve gone through three property cycles. I don’t see this one being any different to the others. I think we’ll see a natural slow down, in Sydney we’re seeing evidence of that now. I’m hoping that Sydney will just stagnate, yields will come back, and we’ll wait another ten to fifteen years for the next property cycle”. Whilst high prices in major capital cities like Sydney and Melbourne remain a challenge, it is likely that as price growth moderates, accessibility will begin to improve. There are also positives coming from FHBs, particularly the fact that the proportion of FHBs spending more than 50% of their income to service their debts is falling. Finally, while accessibility is still the biggest barrier to purchasing a first home, concerns over affordability have been falling. Respondents are increasingly more confident in their ability to meet their mortgage repayments, and of their continued future employment. Conclusion While consumer confidence has fallen over the last six months, it is important to consider this in terms of the current macroeconomic context. “Confidence is everything. It drives business, industries and countries. Today, the confidence level of the average Australian is bouncing around a fair bit. Media and politics have an enormous influence on confidence, however whilst interest rates and general unemployment remain relatively low, it should remain robust. With general demand outstripping supply in most parts of the country, property in Australia continues to prove itself as one of the safest and most solid investments and we just don’t see this changing”. James Symond, CEO of Aussie Home Loans Disclaimer Nothing in this Streets Ahead report constitutes tax, stamp duty, legal, accounting or financial advice. The information and opinions provided are based on an interpretation of the results of the March 2016 Streets Ahead survey and do not necessarily reflect the views of Genworth Financial Mortgage Insurance Australia Pty Limited (Genworth) or its affiliates. Genworth expressly disclaims all responsibility and liability for any action or inaction by you in reliance on any information presented in this report.
Streets Ahead Edition 11