Investor lending recovers after tumbling to 18-year low

Investor lending recovers after tumbling to 18-year low

Confidence appears to be returning to the investor market after the COVID-19 pandemic pushed loan borrowing to one of its lowest levels in recorded history.

Investors borrowed $5.28 billion in September to buy property, according to data from the Australian Bureau of Statistics (ABS), a monthly rise of 5.2 per cent that represented a recovery to pre-pandemic levels.

The relief measures designed to jump-start the economy are encouraging investors to buy property, Daniel Walsh said, a buyer’s agent and director of the investor community Your Property Your Wealth.

“Enquiry is from both first-time and seasoned investors, who are keen to take advantage of the low interest rate environment and purchase a property before prices rise any further,” Mr Walsh said.

Investor loans flailed immediately after capital cities around the country entered lockdowns in March due to the COVID-19 pandemic. About $4.1 billion in loans was issued to investors in May, a low not seen in 18 years and among the lowest since the ABS began keeping records.

But a strong rebound thereafter signalled that investors are feeling confident enough to park their money in property. Investor loans jumped a combined 14 per cent between August and September, helping the category exceed February’s $5.27 billion result.

“Many investors have been watching and waiting to see what happened to property prices during the pandemic, and now feel more confident to move forward with their investment plans,” Mr Walsh said.

“Of course, now we can all see that prices have held up extremely well, and have even risen in some locations.”

Away from Sydney and Melbourne, towards Brisbane

The return to form for investor lending comes as capitals Sydney and Melbourne wrestle with a steep shortfall of renters due to border lockdowns instituted as part of COVID-19 health measures.

Overseas students and migrants tend to rent around the city centres of Sydney and Melbourne. The drop in migrants -- forecast to fall to 31,000 in the financial year ending in 2021, according to CoreLogic projections, a drop from 232,000 a year earlier -- has led to unit values of Sydney and Melbourne falling.

“From a demand side, the evaporation of overseas migrants, including foreign students, has led to a sudden and material drop in the number of renters requiring accommodation,” Tim Lawless said, head of research at CoreLogic

And the gap between supply and demand could widen further, Mr Lawless said, as construction of thousands of apartments wraps up and they are put on the market.

“Both cities have a multiyear history of significant supply additions to the high-rise unit sector,” he said, “where the large majority of properties are owned by investors.”

Property values for apartments in Sydney and Melbourne dropped for five straight months. The deflated values are encouraging investors to look elsewhere for growth.

Investors are looking to the Queensland market, research from the property investment professionals of Australia (PIPA) indicates.

About 36 per cent of investors said they plan on investing in a Brisbane property, according to the advocacy group’s annual sentiment survey of 1100 investors, marking the fifth year running it was their number one preference.

Brisbane stock being snapped up quickly

The number of properties listed on the Brisbane market in April fell to the lowest level it’s been in five years, according to SQM Research.

The low number of properties available on the market is an indicator of demand outperforming supply.

“Stock is really becoming a major issue in many parts of Brisbane,” Mr Walsh said.

“In some locations, such as the Redlands and parts of Moreton Bay, you have to use all of your networks and professional know-how to secure a property for your client because there is such a low supply of listings.”

 

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