Despite a cooling of homebuyer demand in many parts of the country, property investor activity is increasing as would-be landlords seek to snap up homes with good growth prospects.
And a survey of those active in the market right now has revealed exactly where they’re hunting for deals.
The latest Reserve Bank of Australia data showed a 5.8% month-on-month increase in investor lending in April.
It comes on the back of an historic March, when Australian Bureau of Statistics figures showed the biggest value of loans ever, and a 48.4% annual surge in total investor lending.
“The value of new investor loan commitments reached a record high of $11.7 billion in March and was the key contributor to the rise in the value of new housing loan commitments,” ABS head of finance and wealth Amanda Seneviratne said.
Anne Flaherty, an economist at PropTrack, said investors fled markets when COVID-19 emerged in early 2020, spooked by dire predictions of the economic consequences of the pandemic.
The value of new loan commitments to investors slumped to the lowest level seen since the Global Financial Crisis, Ms Flaherty said.
“Since this time, investor demand has been steadily increasing, buoyed by low interest rates and rising prices,” she said.
Investor activity is surging – but not everywhere. Picture: Getty
While rising rates and cooling markets might have some homebuyers hesitating, landlords are rushing to market.
“Investor confidence has been supported by the return of population growth following the reopening of our international border, which is pushing vacancy down and rents up,” Ms Flaherty said.
“Despite interest rates beginning to rise, they remain low by historic levels.”
Although, it appears that the surge in investor activity isn’t being seen everywhere.
Investors not interested in Sydney or Melbourne
Property advisory firm Momentum Wealth surveyed active investors to find out where they’re searching for real estate and found that the two most expensive markets aren’t popular at the moment.
Of those looking to buy within the next year, just 11% are interested in Sydney, while 7% were searching for potential investments in Melbourne.
Perth’s property market is enticing a lot of would-be investors. Picture: Getty
Instead, 40% of prospective buyers are active in Perth, with almost half of those citing the West Australian capital’s affordability and one-in-five favouring the strong outlook for price growth.
Brisbane was the second most-popular investment destination, with 32% of active buyers considering the Queensland capital the best spot to snap up a property.
Of those sniffing around in the sunshine state’s southeast corner, one-third said an anticipated upswing in house prices was the main appeal, while another 35% pointed to the relative affordability of real estate.
Brisbane is another location favoured by investors at the moment. Picture: Getty
Ms Flaherty said the appeal of Brisbane and Perth isn’t overly surprising given what’s happening in those real estate markets.
“Dwelling prices have outpaced rent growth over recent years, driving rental yields down. For this reason, markets such as Perth and Brisbane are generating more interest from income-seeking investors, as they offer higher yields compared to Sydney and Melbourne.”
Momentum Wealth founder and managing director Damian Collins said investors overwhelmingly favoured Brisbane and Perth, with considerably less interest in Adelaide (5%), Hobart (3%), and Canberra (1%) among respondents.
“Our findings confirm that Australia-wide, investor confidence in Sydney and Melbourne is experiencing a decline, while Perth and Brisbane are gaining traction as preferred investment markets,” Mr Collins said.
PropTrack’s latest Home Price Index showed that while national property prices slipped 0.11% in May, Brisbane defied the trend and posted strong growth.
The city’s housing prices increased by 0.35% – second behind Adelaide on 0.58%. Perth prices nudged upwards modestly by 0.19%.
Affordability, outlook, and rent prices are factors taken into account by current investors. Picture: Getty
Experts broadly agree that the outlook for Brisbane is relatively positive over the coming year, while the Real Estate Institute of WA forecasts 10% growth for Perth house prices in 2022.
“Perth in particular offers investors considerable value for money,” Mr Collins said.
“The latest Housing Affordability Report by the Real Estate Institute of Australia confirms that in the December quarter of 2021, 26.2% of household income was needed to service a home loan in WA, compared to 37.3% in Victoria and 46.5% in New South Wales.”
NAB’s recent Residential Property Survey delivered similar results, with surveyed property professionals indicating WA’s market instilled the most confidence (78 points) while Victoria generated the lowest (30 points).
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