In an uncertain climate, we uncover how
both investors and owner occupiers
are approaching the market.
The share of owner occupiers purchasing in the land market reached a new high in June quarter 2020. Owner occupiers represented 85% of the market, up from 77% in the previous quarter, and well above the same quarter last year (71%). This result dwarfs the long running average of 65%, and highlights the absence of investors in the land market and consequent proliferation of first and subsequent home buyers over recent quarters. With the introduction of the HomeBuilder scheme, this trend is expected to continue.
First home buyer representation continued increasing, reaching 73% this quarter – a marginal lift of 3% from the same time last year. Over the second half of 2020 we anticipate an increasing presence of subsequent home buyers, as owners are more likely to be comfortable selling, considering the established house market has not fallen as much as originally anticipated. In addition, the HomeBuilder initiative, historically low Interest rates, and defined timeframes around titles and building, are all attractive factors for buyers to enter the land market.
Prior to the introduction of HomeBuilder, the many other positive variables in play encouraged singles to enter the land market, but only if they were gainfully employed. In June quarter, single owners made up 38% of all household types, up from 26% a year ago. We anticipate this to edge up further still over the next two quarters with the funds associated with HomeBuilder providing a material difference in budgets.
Since the onset of COVID-19, job security has been front and centre. While the discussion has largely been around which industries have been significantly impacted and how JobKeeper has supported employees in those sectors, there are numerous industries either unaffected or boosted by this climate. Our survey results indicate an increasing level of buyers employed in professional, technical and trade roles. Conversely, buyers employed in clerical and administrative roles, along with labourers and related workers have seen a fall as a consequence of work sites operating at reduced capacity. This indicates a growing presence of buyers employed in professional roles in healthcare and government sectors, and technicians and trades who remain classed as essential workers.
An increasing presence of land purchasers (including house and land packages) was evident this quarter (97%) when compared to June 2019 (88%), reducing representation of townhome buyers. This can be predominantly attributed to the HomeBuilder initiative applying to titled or near-titled lots following its introduction at the start of June. With this increased buyer presence, a higher land size was revealed. Just 35% of purchases were for lots under 350sqm, much lower than the 46% recorded a year earlier. Subsequently, 38% purchased in the 351 to 450sqm lot range, up from 30% the previous year.
The higher representation of larger lots, combined with the HomeBuilder grant, has influenced anticipated build spend. This period, 21% of purchasers were anticipating spending in a higher bracket (between $500,000 and $550,000), which is up significantly from 16% seen in June quarter 2019.
The onset of COVID-19 in March quarter 2020 created headwinds for investors, evidenced by the below average share of 23% of total lot sales during that period. Investor representation has fallen further to a long-term low of just 15% in June quarter 2020, almost halving from 29% a year earlier. With job uncertainty, bank lending restrictions for investors, and HomeBuilder incentivising owner occupiers, we expect the share of investors to remain well below average for the remainder of 2020.
Following a retreat in 2018/19, Indian and Chinese born investors returned to the market in December quarter 2019, and have continued to increase in market share since. This quarter, Indian investors represented 32% compared with 19% a year earlier. Similarly, Chinese investors doubled to 16%.
Couples with children made up a significantly higher proportion of investors in June quarter 2020 (68% compared with 45% last year). Conversely, singles represented 20% in June quarter 2019, but fell to just 9% this period. This may indicate an individual’s trepidation taking on an investment loan in a rental market that is expected to retract over the short term. Additionally, banks are more conservative when lending to a single household, particularly if they are already a homeowner.
The increasing uncertainty of the job market had varying impacts on investors, dependent on employment type. This quarter there were no investors employed in community or personal services, nor clerical or administrative roles, despite those representing 19% of buyers this time last year. The lion’s share at 62% this year categorised their employment as ‘professional’, up from 43% in June quarter 2019.
With more restrictive lending practices in place for investors, and increasingly cautious investor sentiment, indicative budgets on build were lower in June quarter 2020. More investors (75%) indicated intended spend in the lower price bracket this quarter, compared to a year earlier where less than half fell into that category.
As a result of lower spend on construction, overall house and land budgets were also reduced, with 66% of investors indicating a total spend under $240,000, while a year earlier just 43% sat in that lower price bracket.
We anticipate the presence of investors in the market to remain depressed over the next six months, and for investors who buy to limit their spend. Nevertheless, for those investors who do buy during the coming months, it is likely to be an excellent investment in the medium term given the current low lending rates projected to remain for years, and the large number of available lots on market.