On August 12, 2015

Encouraging property investment benefits wider economy

Greater investment in the Australian property market has positive knock-on effects for many other sectors of the economy, which is just what the country needs at the moment. This is the view expressed by various property groups, after the latest lending figures suggest owner occupiers are starting to rebound.

June data from the Australian Bureau of Statistics (ABS) shows that the value of loans granted to owner occupiers increased 5.5 per cent from the previous month. Meanwhile, lending for investment housing was down 0.7 per cent.

Many analysts believe this could be in direct response to APRA's decision to regulate the investment lending sector in a stricter manner, in order to open up the market to a greater range of buyers.

Among them are the Housing Industry Association (HIA), Property Council of Australia and SQM Research. Each of these three groups explained just how essential investment activity is not only for the current success of the economy, but also its longevity.

Flow-on effects to the Australian economy

As with any other country, the Australian economy comprises a number of intricate and co-dependent sectors that rely on each other in order to thrive. A decline in property investment lending therefore creates problems for construction, which potentially leads to a rise in unemployment and difficulties for local economies.

The Property Council of Australia's Executive Director of Residential Nick Proud noted that investors are needed to ensure that residential projects can proceed to the completion stage.

"What brings developments to market is a good mix of investors and owner occupiers who can ensure that pre-sale commitments are met and projects go from planning to construction," he explained.

There's also the issue of property prices. If there is a supply problem, then buyers will find they are paying a premium for the homes that are available, placing further pressure on the market.

APRA's measures have already started to impact listings figures, SQM Research revealed, as there has been a slight increase in the number of homes for sale. July figures from the group show that nationally, there was a 3.8 per cent month-on-month rise in listings, while the yearly rise stood at 4.2 per cent.

Shane Garrett from the HIA explained that limiting investment lending has potential to damage "the economy's long term growth capacity". He urged policymakers to focus on the future needs of the nation, rather than just what it needs to achieve in the next few years.

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