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‘There’s a disconnect’: Doubts cast over dire property outlook for investor clients

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‘There’s a disconnect’: Doubts cast over dire property outlook for investor clients

Values in Australia’s biggest residential property markets softened in 2018, and are predicted to fall - and in some cases, dive - further in 2019.

Business Katarina Taurian 02 January 2019
— 1 minute read

CoreLogic data from December shows Sydney is now 11 per cent down from its July 2017 peak, and Melbourne is about 7 per cent down from its November 2017. Economists like AMP’s Dr Shane Oliver are tipping Sydney and Melbourne to fall by another 10 per cent or so this year.

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Property investor clients have been particularly spooked, given Labor’s plans to curb negative gearing if it’s elected to government in May.

For DomaCom chief executive Arthur Naoumidis, a key message to investors has been skated over among the doomsday predictions.

“When prices go down, yields go up. There will be some point in 2019 that yield is going to be so attractive,” Mr Naoumidis told Accountants Daily.

“What do property investors care about? The medium to long-term capital growth and rent,” he said.

“If your horizon is two years, not great. If your horizon in 10 years, while yields improve and you buy low… that is so attractive,” he said.

Mr Naoumidis spoke to Accountants Daily shortly after APRA announced plans to lift its restrictions on interest-only lending in 2019. Caps on lenders throughout 2018 contributed to a tough financing market across the board for property investors.

Mortgage brokers believe APRA’s move will trigger more competition and options for property investors in 2019, but don’t believe there will be a mad rush towards interest-only lending.

“The cap restricted how many lenders we could use, and some priced investment lending so that it’s not competitive. In some cases it’s almost just as cheap to do principal and interest as it is to do interest only," said mortgage broker and owner of Pink Finance, Nicole Cannon.

“I think the awareness is now out there to be mindful of product and structure, and ensure it meets your long-term goals,” she added.

“The awareness is out there about paying your debt down, and taking on only what you can manage, not just what you can get,” Ms Cannon said.

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‘There’s a disconnect’: Doubts cast over dire property outlook for investor clients
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