Westpac says investor loan applications fell 20%, potentially easing housing competition... but affordability remains the real hurdle.
For years, Australia's property market has felt a bit like a game of musical chairs.
Just when you thought you were close to buying, prices jumped again and the chair disappeared.
But recent rule changes could be changing the game for everybody.
The Federal Government's proposed changes to negative gearing and capital gains tax have caused many property investors to hit pause.
In case you missed it, we’ve broken down what you need to know here:
Recently, Westpac revealed that applications for investor home loans fell by 20% in the three weeks following the announcement.
This suggests some investors are taking a wait-and-see approach while they work out what the new rules could mean for their returns.
So, does this create an opportunity for first-home buyers? Maybe… but it's worth looking beyond the headlines.
The proposed tax changes aren't the only challenge facing investors.
The housing market was already cooling after three interest rate rises this year, while higher fuel prices and cost-of-living pressures have squeezed household budgets.
As the Head of Consumer Banking at Westpac states: "When you put the three together, it's quite a lot of change".
Westpac now expects housing credit growth to slow from 6.5% this financial year to 4.7% in the 2027 financial year before recovering slightly to 5.2% the following year.
In simple terms, fewer investors borrowing money means less investor demand flowing into the housing market.
Potentially.
Property investors often compete directly with owner-occupiers for the same homes.
So in theory, if fewer investors are active in the market, first-home buyers may face less competition at auctions and private sales.
We're already seeing signs of softer market conditions.
House prices have fallen in both Sydney and Melbourne, and Westpac forecasts prices will decline by 3% in Sydney and 4% in Melbourne this year.
Some analysts are taking an even stronger position. Morgan Stanley has forecast national house prices could fall by as much as 10% following the budget changes.
Although this could create more negotiating power for buyers who have been feeling priced out, it doesn't mean property suddenly becomes affordable overnight.
When property prices dominate the headlines, it's easy to think they're the only thing that matters.
In reality, affordability is about much more than the purchase price, it depends on several other factors:
A property that's 5% cheaper may still feel out of reach if higher interest rates have reduced the amount a bank is willing to lend you, or your savings rate has declined due to higher cost of living.
The reality is nobody knows exactly how the property market will respond over the next 12 months.
Even Westpac believes any decline is likely to be relatively modest. Analysts argue Australia's ongoing housing supply shortage should eventually put a floor under prices.
So for first-home buyers, the lesson isn't to try and perfectly time the market. Buyers who tend to be best positioned are those who've spent the waiting period on the basics. Think: building their deposit, reducing high-interest debt, and getting a clear picture of their borrowing capacity.
If investor demand continues to soften, buyers who are financially prepared may find themselves with more opportunities than they've seen in years.
And in a housing market that's often felt stacked against first-home buyers, even a little breathing room could make a big difference.
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