Rising rents and lower interest rates are drawing investors back into the property market, giving Australia’s gloomy lending sector some cause for optimism.
Australian Bureau of Statistics (ABS) May housing finance figures show that the value of investor housing rose 26 percent over the month to the highest monthly total recorded since June 2010.
Commenting on the data, Australian Property Monitor’s (APM) Dr Andrew Wilson said the value of investor loans over the first five months of the year is now 7.2 percent higher than for the same period in 2011.
“Investors have surged back into the housing market,” he said in a statement.
“These figures indicate increasing confidence by investors in the Sydney, Perth and Brisbane housing markets.”
APM found median property prices have dropped in the June quarter year-on-year for most capital cities with the exception of units in Sydney, houses and units in Canberra, and units in Perth.
Despite lower property prices boosting gross rental yields across many regions of Australia, RateCity spokeswoman, Michelle Hutchison urged property investors to do their research and take a long-term view to investing.
“While these are positive signs for investors, there are conflicting views on the outlook of the property market. Investors thinking about jumping into the property market this year shouldn’t expect an improvement every year and a more traditional long-term approach should be taken,” she said.
She also encouraged borrowers to shop around for a suitable investment loan, because it could save someone tens of thousands of dollars long term, if not more.
“Standard variable investment loan interest rates range by up to 178 basis points, which could mean an extra $350 each month or $126,000 after 30 years,” she said.
ABS data shows that the investment home loan market has been relatively flat since 2004, with the value of total investment loan commitments sitting at about $6 billion per month. This is compared to an increase of about $4 billion per month for residential home loan commitments since 2004.
“What this means is lenders are eager to lend to investors so there is real opportunity to negotiate hard and secure a good home loan deal if you do your research,” said Hutchison.