Experts warn properties will take longer to sell

Citibank analysts David Kaynes, Kofi Mensa, and Manisha Sandilaya have flagged the cooling property market will result in longer listing periods for properties.

In a research note, Citibank said that a property market crash “won’t be that bad” – indicating a market slowdown rather than a horrific crash. “After three years of rapid property price growth… we now see the market at a turning point,” said Citibank analysts David Kaynes, Kofi Mensa, and Manisha Sandilaya. "As the market cools, properties will take longer to sell, leading to rising listing volumes even if the turnover rate for the market remains low."

The bank noted that the “most likely catalyst” to trigger a decline in housing turnover would be a “significant pullback” in investor activity.

Investors have been shunted out of the market due to the increased difficulty and cost of securing a mortgage for investment properties.

Investor borrowing trending lower

Core Logic’s Quarterly Housing and Economic Review released 31 July 2017 shows lending to investors continues to trend lower. New South Wales and Victoria have seen heightened levels of investor borrowing over recent years and the recent increases in mortgage rates to investors, as well as tighter lending credit policies, are most likely to impact those markets where investors have been most active.

Recent regulatory changes will result in a further fall in new interest-only lending, popular with investors. At the end of March 2017, APRA imposed a 30% cap on new ‘interest-only’ mortgages. Given these changes, it is now more difficult and costly for borrowers to access interest-only mortgages.  

Longer property listing times

With the ongoing changes to lending policies for investors, demand in this segment is likely to continue for some time, resulting in less buyers and impacting listing times, particularly in once strong investor areas like Sydney.

Sydney’s average days on market is recorded at 32 days, however has reduced over the past year (-10). Although these figures seem promising, the impacts from the declining investor market hasn’t hit the data yet as borrowers use up the last of their pre-approved finance.

Savvy buyers are now taking the opportunity to make lower offers on properties that have sat on the market for long periods of time, hoping the vendors have become more negotiable with time.

Sydney buyers should also be conscious of bank valuations coming in low, particularly in the new unit market. It’s even more important that buyers have their finance pre-approved before they go house hunting.

Property market over the next 6 months

Core Logic’s Quarterly Housing and Economic Review indicates that is likely that dwelling values will continue to rise for the remainder of 2017, although the pace of growth is likely to slow. Housing market conditions will continue to vary significantly from region to region and across housing types.

Most of the property risk over the next 6 months is coming from the unit market. They expect the unit market to underperform relative to detached houses.

Securing finance in a cooling property market

The mortgage and property markets are changing rapidly and depending on the location and type of property, different factors are influencing prices, valuations and mortgage approvals. To ensure you’re prepared to buy in the current market, it’s best done with the help of Sydney mortgage broker, Mint Equity.

We’ll provide you with insights into your borrowing capacity, how to secure the lowest interest rate and what property types and suburbs banks are trying to avoid lending to. 

To learn more about how Mint Equity can help, contact us on 02 4340 4847.