Property investors start to pull out of the market pre-auction

Property investors have been pulling out of this weekend’s auctions and showing more caution about purchases, agents said, after this week’s budget curbed investor tax breaks.

First home buyers have also been enquiring about homes for sale ahead of the weekend, when 1874 auctions are scheduled around the country.

But the auction market remains sluggish after three interest rate rises this year, with several vendors planning to sell prior or postpone their auction plans.

Jas Stephens Real Estate agent Elise Nemer in Melbourne said an investor who was looking to bid on a property at auction on Saturday “got cold feet” after the budget.

“What we are getting now is first home buyers or upsizers, and less investors,” she said. Buyers agents have also been telling Nemer that investors are pulling out of sales until they can figure out the new rules.

“From buyers’ agents’ perspectives, investors are getting cold feet until they get used to [the budget],” Nemer said. “Some are looking for brand new builds … but the next two weeks will be tough in trying to get around what’s happening with the budget.

“Once it stabilises, it will be back to normal”.

James Annett, principal at Belle Property Armadale, saw a buyer become confused about grandfathering an investment property.

“I had a situation where a buyer made an offer on a property prior to the budget, but since the budget they can no longer negatively gear it so they pulled out,” he said. “There is an argument to say it’s grandfathered as they bought it prior to the budget, but as the contract was signed but not unconditional, their solicitor advised them to pull out.”

In Sydney, sales agent for Adrian William Real Estate, Norman Tran said while it was too early to tell what impact it was having on the first home buyer market, Tuesday’s budget announcement was pause for thought for investors.

“Understandably investors are using it as an opportunity to reassess their plans,” he said.

He expects investors to be more “specific” when choosing properties in future.

“It’s whether investment properties can offer benefits, if the capital growth is still strong enough to outweigh the inability to claim losses through negative gearing.”

Sales agent for Pulse Property Agents, Luke Lombardi, has seen an uptick in interest from first home buyers this week.

“I have had a few properties on the market for an extended time and I have received multiple offers this week,” Lombardi said.

He is marketing two one-bedroom units at Cronulla and another two-bedroom unit at Caringbah. The one-bedroom units are both for sale with price guides of $650,000 and $760,000.

Not everyone is feeling so enthusiastic, however.

“We have also had a few home buyers pull back after the Tuesday announcement because they are worried about capital gains tax, even though they plan to live in it.

“There is a lot of generational wealth in the shire and they always have the mindset of ‘what else can we buy moving forward’ so they take that into consideration.”

After weeks of watching buyers “sitting on the fence”, BresicWhitney East sales agent Nuri Shik said the changes have provided an incentive for first home buyers.

“All my conversations are around people saying they are sick of paying rent and they want to jump in and buy something.”

Shik is selling a 29 square metre one-bedroom apartment in Rushcutters Bay with a price guide of $475,000 to $520,000.

“I’m expecting a good crowd for the first opening tomorrow but because of the size, they will need a deposit of at least 20 per cent.”

Sales agent for Ray White Touma Taylor, Walter Burfitt-Williams said most first home buyers have other worries.

“The major concern for first home buyers is interest rates,” he said. “Their focus is getting in the door, not minimising tax.”

While he has heard stories of potential investors pulling out of property deals this week, Burfitt-Williams expressed some relief that all the cards were now on the table.

“At least everyone has some certainty now and we can get on with things,” he said. “Sydney property is good property and people will continue to buy it.”