Housing recovery happening, driven by unsung trade-up buyers: Terry Ryder
Amid all the negativity about real estate, much of it peddled by groups representing builders, not many people realise how much home lending has grown this year.
ABS data shows a 7% rise in the number of home loan commitments in the 12 months to the end of July 2012.
New South Wales, Western Australia and the Northern Territory have all had double-digit growth in loans to owner-occupiers in the past year.
Queensland, Victoria and South Australia have also experienced more activity by home buyers. There’s been little change in the ACT, leaving Tasmania, the basket case among the state and territory economies, as the only jurisdiction with a decline in home loans.
Loan commitments by investors have also risen, though by less. The value of loans to individual investors is up about 2% in the past 12 months. Queensland, the Northern Territory, NSW and Western Australia have had the most marked rises in investor activity.
The figures show that we generally have a recovery happening, but it’s not being inspired by investors, nor by first-home buyers. ABS data shows that only 19% of loans to home buyers are for first-time buyers.
The upturn in market activity is being led by that highly under-rated market sector, the one that no one talks about, the people who never get blamed for rising house prices but who are, undoubtedly, the reason our home prices tend to rise steadily. These are the trade-up buyers – i.e. home buyers other than first-home buyers.
Right now only about 30% of the residential buying market is investors; 70% are owner-occupiers, of which less than one-fifth are first-home buyers.
The current market share of the total residential market is 13% first-home buyers, 30% investors and 57% owner-occupiers other than first-home buyers.
Buyers in this latter category are the unsung heroes (or villains, depending on your viewpoint) of the residential market. When hand-wringers are rabbiting on about the fictitious affordability crisis and looking for someone to blame for our terribly expensive houses, they usually single out grants to first-home buyers or tax benefits for investors.
In doing so, they always get it wrong, which is why they always fail to get a response out of politicians and industry leaders.
They always ignore the party most responsible for the general upward spiral of property values: the people who not only comprise the bulk of the market but have the financial capacity and motivation to pay a top price (unlike first-home buyers, who are constrained by a tight budget, and investors, who have no emotional attachment to what they’re buying and just focus on the numbers).
When these trade-up owner-occupiers are busy, markets rise. The latest figures suggest they’re out in greater numbers this year, and that’s why capital city prices are now showing signs to rising again.
If political leaders, like the Neanderthals who currently run Queensland, really want to stimulate the property market and get people building houses, these are the people they should be targeting.
Instead of tossing a few bones at first-home buyers, 80% of whom prefer to buy established homes because they’re cheaper and better located, they should be encouraging the people who comprise the bulk of the market and have the capacity to pay a little more.
That won’t happen, of course, because it would be deemed politically unacceptable to be helping older, more affluent households, rather than struggling young couples who have somehow acquired the status of a protected species in residential Australia.
Regardless of what politicians do or, more to point, don’t do, our major markets are moving forward and it’s all being led by the silent unacknowledged majority who get no government grants and no tax benefits.
Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.