Lured by low interest rates and strong rental yields, more Australians are taking the plunge into property investing, research shows.
February saw the highest value of investment loans written since before the global financial crisis, with investors borrowing $7.9 billion, Australian Bureau of Statistics data shows.
According to RateCity research, that was the highest value of investment loans written in one month since the previous high of $9.1 billion in June 2007.
Michelle Hutchison, spokeswoman for RateCity, said growth in investor borrowing outstripped residential borrowing by almost three times.
“It’s interesting to see a significant lift in investment property, especially compared to the growth of residential mortgages. We haven’t seen this level of value in investment home loans for five years,” she said.
The residential home loan market is a much greater pool of money compared to investment loans – $13.9 billion compared with $$7.9 billion, yet the growth rate is significantly higher, she said.
RateCity also saw an uplift in the number of investors using the site to compare and apply for investment home loans. For example, there was a 50 percent increase in the number of investment loan applications in March, compared to the same month last year.
“We’re seeing ongoing variable rates starting from 4.99 percent, fixed rates as low as 4.83 percent and intro rates from 4.29 percent,” said Hutchison.
“Australian Property Monitors’ March quarter report shows most yields for both houses and units were up year-on-year, by as much as 10.2 percent for houses in Darwin and up to 11.4 percent for units in Perth.”
Meanwhile, a separate study conducted in February revealed that property investors were hundreds of dollars per month better off than they were two years ago, given the low rate and strong yield conditions.
SQM Research found that on a typical house with an interest-only home loan of $400,000, property investors were $601 per month in front compared to two years ago. That’s because variable interest rates had fallen 1.4 percentage points in that time and average house rents rose by 6.3 percent nationally – and 14 percent over the past four years.
Despite strong growth indicators, would-be investors are urged to do their research and take a long-term view to investing in property.
“While these are positive signs for investors, there are conflicting views on the outlook of the property market,” said Hutchison. “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.”