When it comes to property investment in Australia, the appetite for a piece of NSW continues to surge, despite the fact rental yields are at record lows.
NSW and Victoria now account for 67.8 per cent of Australia’s total housing finance commitments, according to CoreLogic, which is marginally behind the 2000 record of 68 per cent. Almost half of investor property lending is for NSW houses and units.
As CoreLogic points out, it makes sense that the two most expensive states, NSW and Victoria, have a high proportion of total mortgage finance, but what makes less sense is why NSW investors are still so hungry.
“With investment lending significantly tilted to NSW and considering that in Sydney housing supply is ramping-up, rental growth is at historic lows as are rental yields and the growth cycle is very mature, it is difficult to determine exactly why investment remains so strong,” said Cameron Kusher, senior research analyst at CoreLogic in a recent blog.
Little more than a year after APRA tried to pump the brakes on investor lending by telling banks to increase capital buffers, the investment market is starting to slowly bounce back. Data from the Australian Bureau of Statistics showed investor lending rose 1.3 per cent between May and June.
For investors, it’s worth keeping in mind that returns can be gained through either rental yield – the money you receive for leasing your property – or capital growth – the profit you receive if you sell your property for more than you bought it for. The big question for borrowers will be whether NSW can continue to tick those boxes.