Investor confidence returns to property market
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After a tumultuous year which saw the majority of investors withdrawing from the market to observe cautiously from the sidelines, it looks like current strong conditions have prompted the cashed-up cohort to return in droves.
The latest numbers from the Australian Bureau of Statistics (ABS) show a 9.4 per cent increase in new investor loan commitments for January. In NSW, that number is at 6.7 per cent, the highest it’s been since about June 2018.
According to the ABS, the average investor loan was highest in New South Wales at $658,900, followed by Victoria ($537,388), Queensland ($441,037), and Western Australia ($411,649).
Andrew Wilson, chief economist at Archistar said that while the growth in investor lending has been strong in recent months, the ratio of investors to owner occupiers remains within a healthy range.
“Investors have clearly now joined the stampede of buyers rushing housing markets, but the overall home loan market share of investors remains at record low levels, offsetting any concerns by the RBA and financial regulators of potential market disruption,” he said.
The total share of investors currently hovers around 19 per cent, much lower than the long-term average of 33.1 per cent. It’s also a far cry from 2014 levels, when investor activity exceeded 40 per cent and financial regulators were forced to intervene.
For buyers’ agent Grant Foley, the uptick in investor confidence has seen his clientele shift from predominantly owner occupiers in 2020 to largely investors in 2021.
“The values of their properties have continued to grow over recent years and they are now feeling confident to reuse some of their equity by starting, or growing, their strategic property investment portfolios,” he said.
“Many investors also have additional cash at their disposal after being forced to reduce their discretionary spending over the past year and some have also withdrawn funds from the stock market to invest in property rather than shares.”
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Record low interest rates continue to support strong market conditions, with fixed rates in particular playing a major role in attracting buyers.
Those with sights on the property market have strong reason to believe those settings will remain for a while yet. In its March policy meeting last week, the Reserve Bank of Australia once again indicated it won’t be raising the cash rate for at least another three years.
Wilson agreed this was the best course of action, saying that any increase in the near future would be premature and likely to weigh on the economy.
“Any misguided move to raise interest rates to quell strong buyer activity would clearly place in jeopardy the current fragile and nascent economic recovery – something the RBA has clearly acknowledged,” he said.
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