House price growth across Australia is set to slow considerably over the next two years as fewer foreigners and first time buyers enter the market, a new report indicates.
The Australian National Bank’s (ANB) latest quarterly residential property survey, which covers the three months to December 2014, reveals that fewer foreigners are currently targeting the Australian property market and those who are tend to be looking to purchase more affordable properties than they once were.
The new figures show that during the final quarter of 2014, foreign buyers were less active across all Australian states, except for Victoria, where they account for a third of all new property sales.
“Foreign buyers accounted for 14.8 per cent of total demand for new property in Quarter four, down from 16.8 per cent in Quarter three. In Victoria, however, they accounted for a new high of 32.5 per cent of total demand,” explained NAB Group Chief Economist Alan Oster.
The report shows that around 70 per cent of all foreign purchases are for properties valued at less than AUS$1 million and 5 per cent are in excess of AUS$5 million.
The survey also shows that first home buyers looking to invest account for eight per cent of total new property demand and over nine per cent in existing property markets.
“This suggests that affordability constraints or potential capital gains are encouraging some first home buyers to delay moving in to their first homes,” said Oster.
With regards to how these trends would likely affect the Australian housing market over the next couple of year, Oster said: “We are forecasting average house price growth of around 4 per cent over the year to end-2015 and 2 per cent over the year to end-2016.”
Last November the Organisation for Economic Co-operation and Development (OECD) had warned the Reserve Bank of Australia that it should seriously consider raising interest rates in a bid to slow rapidly rising property prices in the country.
Figures had shown that Australia’s house prices increased by more than 11 per cent in the year to August 2014, with prices in the Sydney and Melbourne markets growing more than 16 per cent and 12 per cent respectively.