- Investor demand having been pulled forward, prospective buyers would fairly quickly "run out of money" and the real estate market would switch into reverse; and
- Yields would slide low enough that prices would inevitably soon follow suit and decline.
In other words, lower yields have not deterred investors and nor will they do so now unless the cost of debt rises significantly.
Price growth expectations are what matter
AKA: capital growth or pure price speculation.
We don't necessarily agree with all of the Residex forecasts - in fact they appear to be remarkably bullish in some cases - but if sustained such a rate of growth implies that median prices would in fact be double what they are today in only a dozen years time, and certainly within well under 15 years.
Meanwhile, it would also be expected that gross rents from a well-located investment property would rise over such a time horizon too.
Part 1 - AFG mortgages boom to 21 year high
Can Sydney's median house price really soar to above $1 million in this cycle? The data certainly suggests that this may eventuate.
The trend data is not seasonally adjusted but, volumes written are up by 36 percent over the past two years.
South Australia was flat, recording no increase over the past year.
There appear to be only three possible conclusions might be drawn from this data set:
(i) AFG has massively increased its market share at an astonishing rate; or
(ii) we have just witnessed an anomalous month of lending in October by AFG; or
Part 3 - Investor share of loans eases
While the percentage of investors remains elevated in New South Wales at 49 percent, the share of loans for investment housing declined across all states with South Australia recording the sharpest drop down to 30 percent.
Again there are seemingly only three possible conclusions which one might draw from this:
With Sydney vacancy rates remaining low on a city-wide basis at just 1.7 percent, in stark contrast to the preceding boom a decade ago, borrowing rates at previously unthinkably low levels, and apparently no interest rate hikes on the horizon, an unprecedanted market blow-off could be a possibility.