_Australian residential market challenged by access to finance

Late 2018 marked four years since APRA wrote to financial institutions imposing a restriction in the growth of their loan book to residential investors. Over the course of 2014, Australian house prices had rapidly grown 8.2% and apartments by 8.0%. It wasn’t until the past year these restrictions most impacted Australian house values—trending down by 6.5% and similarly, apartments falling by 5.3%. 

Once driving up price growth, Sydney and Melbourne are now skewing the Australian average while in correction mode, with the median house price falling by 9.9% and 8.4% respectively. 

Looking at the underlying fundamentals, both markets are continuing to experience the strongest population growth for more than 25 years, the lowest unemployment on record for Sydney (and the tightest in Melbourne for the past 10 years), whilst the Australian government has committed more than $75 billion over the next 10 years in transport infrastructure across Australia (in addition to state-based government projects). 

There have certainly been elevated dwelling completions, but its accessing finance for investors which continues to challenge the market. Although this has seen a welcomed return of first home buyers. As vendor and developer expectations have now adjusted, so too will investors in this new responsible lending environment as we approach the bottom of the cycle for these east coast cities.

Read our latest Australian Residential Review here.