21 April 2014 Investors continue to drive Australia’s property market

Nearly 40% of all mortgages processed in March were for investors – which proves just how much investors are currently driving the market.

According to AFG’s latest Mortgage Index, two out of every five (39.6%) new home loans last month were for investors. This equated to a total of 3,384 loans with an overall value of $1.6 billion.

AFG sales and operations manager Mark Hewitt said it was the highest such figure ever recorded by AFG and raised the question of just how much investment stock there is out there.

The drivers for this surge of investor activity were low interest rates combined with a desire to make use of the equity built up in their existing properties, he said.

“Australians are very comfortable with property as an investment. It’s in our DNA. So investors are looking to diversify their portfolios in the currently favourable market environment.”

Not surprisingly, the investment activity differed across the country:

  • Victoria and Queensland: 37% of all new home loans went to investors.
  • South Australia and Western Australia: 32% of all new home loans went to investors.

NSW: 49% of all new home loans went to investors Hewitt said he had some concerns about the flow on effects of the low levels of first home buyers getting mortgages.

Just 10.7% of new home loans went to FHBs in March but, historically, around 20% of loans went to FHBs.

“It is getting more difficult for FHBs, and people who are not already established in the market, to enter the market.”

The longer this continued, and the lower the levels of FHBs got, the more the rest of the market will slow down, he said.

“Although this situation leaves investors, especially established investors, in a very strong buying position.”

Fixed rate loans comprised 23.9% of all AFG mortgages processed in March. This was down from 25% in February and a peak of 30.7% in April 2013.
Hewitt said this suggested that borrowers were also less concerned about the prospect of potential rate rises.

“Rate rises often don’t impact on investors as much as they do on owner occupiers,” he added.

Reproduced in full with permission: Your Investment Property April 2014.

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