More buyers favouring off-the-plan properties

Lending restrictions have pushed first home buyers (FHBs) and property investors away from established homes and towards new-build homes in recent years, CoreLogic analysis has found.

CoreLogic Chief Property Economist Kelvin Davidson said the share of new-build purchases going to mortgaged investors rose from about 25% in 2020 to more than 30% in 2022 as the tax rules shifted in favour of new-builds – and had stayed at that higher level since then.

As a result, investors had displayed comparatively less interest in established properties during that time.

“This distinction has become a little less relevant for some buyer groups (especially investors) in the past few months, as the mortgage interest deductibility and Brightline Test playing field has been levelled out. However, the loan-to-value ratio (LVR) rules and debt-to-income (DTI) restrictions still favour new-builds, so there’s still considerable interest here,” he said.

“Meanwhile, first home buyers have also become a bigger player in the new-build segment over time, with the LVR rules likely to have played a role (new-builds require smaller deposits) and also the fact that more new-builds in recent years have been townhouses, which are cheaper than other types of dwellings. That lower entry price for townhouses will have tended to help FHBs overcome any affordability hurdles.”

Movers doing less moving

Meanwhile, Mr Davidson said movers had also changed their behaviour since the pandemic.

“Broadly speaking, this group has been relatively quiet in recent years, with factors such as market uncertainty and challenging financing conditions meaning more of them have been happier to just stay put rather than shift house,” he said.

Of the mover activity that had happened, though, Mr Davidson said there had been relatively fewer people shifting locations than in the past and relatively more people upsizing or downsizing within the same location.

“This fits with the general rule of thumb that a weak market can be a good time to move up the ladder because although you might take a price hit on your own property, there’s the possibility of a bargain on the next one too,” he said.

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