It’s been a difficult 18 months for Australia’s economy, and one which has seen investors sit out of a soaring property market as the coronavirus pandemic smashed our shores.
But it seems there has been a turnaround in sentiment with lending data showing that investors have begun to pile back into the market.
Investor loans have surged
New home lending increased by 4.9% from the month prior and a whopping 95.4% or $15.90 billion from May 2020.
While the value of owner-occupier lending only saw moderate month-on-month gains, investor lending has gone through the roof, up to $1.07 billion from April, according to new ABS data.
Investor lending has now hit the highest level since June 2015 with $9.13 billion of new loans in May, more than double the value in May last year when Covid-19 was in its early stages.
“Investor loan commitments have seen an unbroken period of growth since October 2020 and almost doubled in value compared to a year ago,” the ABS said.
Not only has the value of new loans to investors almost doubled since this time last year, but the value of investor loans has increased in every state since the pandemic began.
In Western Australia, Northern Territory, Queensland, and the ACT, the data shows investor loans have doubled since March 2020.
Victoria bucks the trend, however, as it saw the level of investor lending drop slightly over June and July this year, likely dampened by restrictions on property inspections as the state grappled with a Covid-19 outbreak.
And the ABS data is supported by what we’re seeing elsewhere also.
REA’s investor enquiries have increased a huge 90% over the past year to reach a level not seen since early-2019.
Why the turnaround in investor sentiment
Because as targeted stimulus fades and first home buyers are once again all-but-shut out a booming market, investors have identified an opportunity to take over.
Recently Treasurer Josh Frydenberg announced that the Covid-19 Disaster Payments will be wound down once Australia’s states and territories hit the 70% double vaccinated rate and halted altogether once the 80% rate is hit, in order to discourage states from reintroducing lockdown measures.
That’s just weeks away for some states.
At the same time, the rental market is extremely tight in many parts of the country, with rental price growth rising to the highest level in nearly 15 years - another reason investors are jumping back in with both feet.
Now we’re also seeing a perfect storm combination of low borrowing costs, ongoing capital growth and attractive rental yields attracting investors back into the market.
I think booming house prices will continue to attract investors which will add demand to housing markets that are now providing signs of coming off peak growth rates.
Although rising affordability barriers will act to side-line owner-occupiers – particularly first home buyers, investors generally do not face the same constraints.
Of course, our regulators are now talking about introducing macroprudential controls to slow our property markets down, but I can’t see that dampening investor enthusiasm.
20 regions where investor enquiry has rocketed
REA data shows that South East Queensland is a clear favourite for investors in 2021 so far.
In particular, Greater Brisbane, Darwin, and regional Queensland have all shown strong year-on-year increases.
And by region, investor enquiry for all property types increased the most in Logan, Moreton Bay, Ipswich and North Brisbane.
Not just to be clear… I’m not suggesting these are good investment grade locations.
In fact, most of these are not locations where we would recommend investors look.
While Brisbane has some great opportunities many of the other locations where investors are currently looking will see them disappointed in a couple of year’s time when the market eventually turns and they are left with secondary properties in secondary locations.
Looking specifically at enquiries for units, it seems investors have well and truly shaken off any reservations they may have had of a perceived oversupply in Brisbane.
Realestate.com.au reports that North Brisbane investor enquiries have increased more than 400% year on year, while south Brisbane and Brisbane’s inner-city are also seeing strong annual growth of more than 200%.
For houses, investor enquiry has grown in both Brisbane and coastal Queensland markets.
Enquiries are up the most in the Logan-Beaudesert, Moreton Bay south and Ipswich SA4 regions, the data shows.
Darwin and regional SA (Barossa – Yorke – mid-north) have also recorded large increases in investor email enquiries.
Why?
Because relative affordability and tight rental markets appear to be piquing investor interest in these areas, REA says.
“South East Queensland and Brisbane property remain relatively affordable compared to the other East coast capital cities and yield advantages over NSW and Victoria have seen many looking for an opportunity in Queensland.”
How much are investors spending
The booming property market and sky-high prices are not only affecting owner-occupiers looking for their first or next home.
The data also shows that investors are being forced to increase their budget in order to account for price growth across nearly all markets and regions.
REA data shows that the median price of house listings that investors have been enquiring about has also steadily increased since 2019, jumping 12% between January 2019 and August 2021.
And it’s the same for units.
At a national level, the median price of unit listings enquired on by investors rose 17% between January 2019 and August 2021.
Investor price points are at their highest in New South Wales for both houses and units, whereas Tasmania has the lowest investor price point for houses and Western Australia has the lowest price point for units.
Interestingly, since the pandemic hit Australia’s shores back in March 2020, the median price of unit listings in the Northern Territory saw the biggest increase across the nation.
And new investor lending in the state has unsurprisingly followed, doubling during that time as investors take advantage of strong price growth and high rental yields, REA says.
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