Are Investors Killing The Great Australian Dream?

Will investors continue to slay in 2018 or is it finally the time for first home buyers to capture a piece of the property market?

Home ownership has long been a part of The Great Australian Dream. But it wasn’t until the 1980s that property investing rose in popularity, fueled by deregulation of the finance industry, tumbling interest rates and dual income households, which made home loans easier to attain.

Add in rising property prices and negative gearing and property investment became an increasingly attractive option. The Great Australian Dream was no longer just about putting a roof over your head, but an excellent way to accumulate wealth.

Approximately 35% of residential loans taken out in Australia in September 2017 were investment loans, according to the Australian Prudential Regulation Authority’s monthly banking statistics. In 1993, three-quarters of a million people were investors in residential rental property, according to the ABS, while tax data from the ABS, ATO and RBA shows the share of the population with an investment property grew steadily through the 1990s and early 2000s, before stabilising in the late 2000s at around 10%.

Of course, it isn’t just Australians drawn to the idea of owning property as an investment. International buyers have flooded the market in recent years, vying for a piece of that dream. foreign investment Review Board (FIRB) Annual Reports show the number of foreign investment applications (both residential and commercial) considered in 2005-06 was 5,781. In In 2015-16, this number had grown to 41,445, representing $247.9 billion of proposed investment.

In March 2017, Credit Suisse reported that most purchases from foreign investors are for properties valued under $1 million – which puts foreign investors in the same market as local first home buyers.

As a result, many first home buyers have been left scrambling to get a leg-up on the property ladder. It makes you wonder, has turning property into an exchange value ruined the property market? And is the Australian tax system to blame – or are foreign investors?

Need a home loan?

UNO. The new way to get a better deal.

Get Started

A tax system that motivates housing investment

Before this year’s Federal Budget, there was debate over whether changes should be made to capital gains tax (CGT) concessions and negative gearing. When you sell a property you make a capital gain or loss. In the 1999/2000 tax year, the Government halved the capital gains tax for investment properties, enabling investors who hold an asset for more than 12 months to receive a 50% discount on the CGT liability when they sell.

This led some economists to state that capital gains tax deductions are too generous for property investors as they overstimulate the market and contribute to rising house prices.

Changing tides

But things may be looking up for first home buyers. In recent months, the brakes have been put on foreign ownership with tighter lending restrictions. On 9 May 2017, the Government announced that Australia’s foreign and temporary tax residents would no longer have access to the CGT main residence exemption.

It also introduced other limitations on foreign investors, such as a cap on foreign ownership in new developments and a fee for foreign-owned properties that remain vacant for more than six months in a year.

A new directive by the Chinese government to place property investments on the restricted list has further softened the demand here (more than 80% of our foreign investment comes from China, according to Credit Suisse). And the measures are having the desired effect. During the third quarter of this year, the market share of foreign buyers fell to a 5-year low of 9.5%, as reported in the latest NAB Quarterly Australian Residential Property Survey.

New recommendations from APRA have also helped. In March, the regulator stated interest-only loans need to be restricted to 30% of new residential mortgage loans. Then in May, it tightened reporting requirements. Banks needed to make significant changes in lending policies for investors. By the end of June, the top five banks were directed to increase the amount of capital they hold against mortgage exposures.

The door to homeownership opening

While APRA’s intentions were never about helping housing affordability (they were to ensure the stability of our banking sector), the result was more expensive mortgages and lower mortgage volumes for investment loans.

With the tides turning for foreign investors, might the time now be ripe for first home buyers in Australia to capture a piece of the market? UNO’s chief financial officer, Jason Azzopardi believes so.

How much can I borrow?

Use UNO's calculator to estimate your borrowing capacity.

Calculate Now

“Easing growth in most major cities, a bottoming out of rates enabling first home buyers to lock in excellent fixed rates, as well as NSW introducing stamp duty exemptions will likely see first home buyers return to the market in 2018,” he says.

UNO’s cutting-edge technology is designed to help you find the best home loan deal for your circumstances. Use our calculator to see how much you’ll need to borrow to get that dream home, search through our list of lenders to find the best rate for you, or Book in a quick call with our customer care team.



5 stars for our service reviews from clients

Book Call Now

UNO home loans

Try Plans, by UNO
Mortgage calculators completely reimagined
Get Started
Considering a purchase or refinance?

Try Plans by UNO

Mortgage calculators completely reimagined
Get Started
☎️ 🚫 No cold call promise

Related Articles

TESTIMONIALS

What our customers are saying

Matt Carter
May 21, 2025
5 stars for our service reviews from clients
Paul from Uno has been amazing. Made it so easy! Highly recommend and made the finance process much more enjoyable experience for us.
Read more
Timothy Semsarian
May 17, 2025
5 stars for our service reviews from clients
UNO went above and beyond to help my wife and I with our home loan and settlement. Couldn’t recommend them enough - Jake Wood was an absolute legend! Kept us informed during the whole process and was very thorough with his work, even with a very tight timeframe. Thank you again for all your help, and looking forward to continue using your services!
Read more
Patti Jo Mogensen
May 16, 2025
5 stars for our service reviews from clients
100% Rockstar. We found Paul and Uno Home Loans from recommendations from people who had used his services. We know understand why he comes so highly recommended. We definitely put Paul and his team under pressure due to an oversight our end which meant that he had to don his superman cape and work miracles for us. We didn't appreciate the very very short window we created for ourselves (think less than two weeks for settlement). Paul was able to wave his magic wand, come up with multiple solutions to our situation and make it all happen seamlessly. It goes without saying then, without reservation that we recommend Paul and his team as our trusted mortgage advisor! Thanks again Paul. *****The limoncello is on route we promise :)
Read more
Lani Wards
May 13, 2025
5 stars for our service reviews from clients
Paul Davey worked very hard to get us the mortgage we required for our investment property. He is knowledgeable and approachable. Thanks Paul!
Read more
Michael Badham
May 13, 2025
5 stars for our service reviews from clients
Our entire process with Uno went very well. We had a unique set of requirements for our loan and our super friendly broker Mike Parsons managed to secure us the perfect outcome. Mike also worked above and beyond our expectations to make sure the whole process of completing the documentation of switching banks went smoothly.
Read more
Vanessa Koster
May 13, 2025
5 stars for our service reviews from clients
The service recieved from Paul was fantastic. He made the whole process stress free & easy. We started the process from NZ & Paul had everything ready for approval as soon as we landed in Aus. I would highly recommend Paul if you require a mortgage. You won't be dissapointed.
Read more
Peta Hemmings
May 13, 2025
5 stars for our service reviews from clients
Paul has been amazing throughout our entire home loan process, we have recommended him to many of our family and friends. He has been extremely helpful and professional right from the beginning.
Read more
Ryan Whittle
May 12, 2025
5 stars for our service reviews from clients
Highly recommended, Paul and his team made the process very streamlined delivering the best possible results.
Read more
Tiana Perez
May 10, 2025
5 stars for our service reviews from clients
Paul and Dalby were incredible to deal with, from the first interaction with Paul a few months prior, to getting approval to purchase, through to the last minute helping us with the final settlement details. Their communication was second to none and they truly went the extra mile. Paul managed to get us more borrowing power than dealing with the bank directly. I couldn't recommend Paul and his team enough. Paul and Dalby, thank you so much for putting hours and hours of work into our application. We really appreciate it!
Read more
Nicholas Violaris
April 14, 2025
5 stars for our service reviews from clients
Can not recommend UNO Home Loans enough, Scott Wilkinson and his team have helped us get a home loan in no time and they have been a breeze to deal with, great job guys, looking forward to working together more in the future
Read more
Lahnie Cooper
March 26, 2025
5 stars for our service reviews from clients
Jake Wood was a pleasure to work with and made this process extremely easy for me! I highly recommend Jake and the team at Uno.
Read more
Daniel Demosthenous
March 18, 2025
5 stars for our service reviews from clients
The team at UNO were absolutely fantastic at helping me set up and organise my new property purchase, Andrew answered all my questions promptly and went over and beyond to reassure me at any stage with his abundance of knowledge of the matter, also a big thank you to Dalby and Jena for helping with the process as well.
Read more