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First-Home Buyers Face Stiff Competition As Investors Return To The Property Market

By Rachel Wallace

First-home buyers are beginning to be squeezed out of the housing market by investors who are driving stiff competition at auctions, agents report.

The change is trickling through on auction floors with more investors registering to bid on properties, sending prices higher. Some are determined to buy bricks and mortar rather than leaving money in the bank, where it largely collects dust due to the low-interest rate environment.

More investors are competing at auctions, which is pushing first-home buyers to their limits. Photo: Peter Rae. Photo: Peter Rae

It comes after the latest housing boom has been fuelled by owner-occupiers, keen to take advantage of cheap mortgages to move into more spacious homes with room to work remotely. Investors often return to the market once prices rise and they can see the potential for capital growth.

In April, investor loans across Australia increased by 2.1 per cent, reaching a record four-year high of $8.05 billion, the latest Australia Bureau of Statistics data shows.

First-home buyer loans dropped 1.9 per cent in the same month.

Home loans to owner-occupiers and investors have risen. Photo: ABS
Home loans to first-home buyers are starting to fall. Photo: ABS

In NSW, where investor loans increased by 2.5 per cent, BresicWhitney head of sales Thomas McGlynn said while investor activity had picked up in the past month across the board, they would fuel price growth in the unit market in particular in coming months.

“We are seeing investors returning to buy properties that are semis, terraces, freestanding homes. Where we are going to see an uptick in prices because of investors is the apartment market,” Mr McGlynn said.

They were taking confidence in an improving rental market and the opportunity for a stronger run in unit prices, Mr McGlynn said“The fact that you’re buying very, very good value on apartments as opposed to terraces that have similar square meterage.”

First-home buyers will begin to feel the pinch as they try to remain eligible for discounted stamp duty and government grants by paying less than the relevant price thresholds, he said.

“First-home buyers will start to compete with investors, which will make it difficult for them. That could definitely push prices over those numbers,” Mr McGlynn said.

But, investors are already competing for homes at different price points. At the weekend, an investor dropped $1,885,000 on a renovated Marrickville house, outbidding a first-home buyer who had missed out at auction several times this year.

In another instance, an investor picked up a three-bedroom unit at Lane Cove, outbidding several first-home buyers, said Ben Plohl, founder and principal of BFP Property Buyers.

In the past two months, 80 per cent of Mr Plohl’s new clients have been investors.

“There is a massive influx of investors coming to market now. A lot of cash buyers, which is interesting,” Mr Plohl said.

“With interest rates so low and inflation on the rise, cash in the bank is kind of worthless. It’s the old chase for yield and the flight to safety.

“In terms of increasing prices, it will start to trickle down and in terms of pushing up competition, 100 per cent it’s been around for the last month.”

He said even rent-vesters, who are first-home buyers priced out of their location of choice who rent where they want to live and buy an investment elsewhere, were adding fuel to the fire.

Many have turned to buying investment properties in more affordable states, including Queensland where price rises have been more moderate.

Loans to investors in the sunshine state jumped 7.1 per cent in April.

In Victoria, investor lending grew 2.2 per cent in the same period and agents reported investors preferred houses over units as they continued to suffer the effects of the pandemic.

Many Melbourne investors were looking farther afield in country Victoria, said Peter Kakos, The Agency Victoria general manager.

“What you’ll find is people will look at purchasing something out of Melbourne in a four or five year plan of moving there,” Mr Kakos said. “It’s offering good growth and good yield.

“It makes sense for these lifestyle destinations.”

But, investors were experiencing FOMO like owner-occupiers, said sales director and auctioneer Arch Staver, of Nelson Alexander, pushing out first-home buyers as they are hit first by affordability constraints.

“We’re seeing a steady return of the investor but they’re focusing on the traditional housing market more so than the apartment market, which suggests to me that it’s probably Baby Boomer money,” Mr Staver said, adding that many investors were small, self-managed super funds that were looking to park their cash in property than in the bank.

“They are more heavy hitters attending the same auctions. By heavy hitters, we simply mean people who have the capacity to pay more than the reserve. To get emotionally involved in a bidding war.

“When you have people with more means that get emotionally involved the auction results speak for themselves.”

In April, Melbourne recorded a clearance rate of 69.9 per cent, Domain data shows and dwelling prices were up 1.8 per cent to $750,562, CoreLogic figures shows.


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