Why are investors cashing out?
When Robin Hood said ‘Rise and rise again until lambs become lions’ he was not making predictions about the 2018 Australian property market. But he could have been. Right now, previously timid, wannabe first home buyers are finding their roar.
According to a Core Logic’s National Auction Market Preview report from last week, capital city auction clearance rates, once peaking at 80%, have settled below 45% for the third week running. Luke Crost, Ray White Principal of South Brisbane said ‘I am seeing people who bought a house in the last 10 to 15 years selling and putting their money into other investments with higher yield, as prices aren’t really going up right now.’
The reasons for this are wide and varied. But the big one is that thousands of investors have come to the end of interest-only loans and now need to find principal as well. This is happening in a market where lenders are increasingly wary, and refinancing is harder and takes longer due to tight lender requirements. So, with costs rising and margins shrinking - some estimate an increase in monthly repayments of up to 40% - some overstretched investors will be forced to sell.
Investors unable to service their loans pose a big threat to market stability. But one person’s nightmare is another’s dream, and right now this couldn’t be truer if you want to own property. Things are beginning to shift in favour of buyers.
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