Investors breaking records this spring
November 13, 2014 / Written by Rich Harvey
This week has seen the release of the Australian Bureau of Statistics' (ABS) data on home financing for September, and it's shown a continuation of the thriving Australian investment property trends that were mentioned by the Reserve Bank of Australia.
In his November 4 statement on the cash rate, RBA Governor Glenn Stevens said investor activity was driving credit growth up in recent months as low interest rates kept this buying group hungry for a good deal.
This new ABS data has shown just how strong the investor activity is in the property market, and it's worth looking at this breakdown.
Record highs for investment
Cameron Kusher, research analyst for RP Data has looked at the ABS figures for home financing and noted that for the very first time, the value of home loans for investment ($11.9 billion) is greater than the value of owner occupier home loans ($11.8 billion). Investor commitments to financing are also 25.4 per cent higher than they were last year, showing a surge in activity that may have driven the boom in home prices noted in Sydney and Melbourne this past year.
It isn't just the value of loans to investors that has reached a record either - they have also broken new ground in terms of their share of the total lending market. Mortgages for investment now account for 41.4 per cent of all lending from authorised deposit-taking institutions. Owner-occupier loans comprise 40.8 per cent of the market, which is an all-time low for this group.
What to watch
With these new records entering the fray, it is worth remembering the words of the Reserve Bank over recent months. In their September Financial Stability Review, it was noted that macro-prudential controls recently introduced by APRA could be used to manage risk in the market, as there was some concern about the high level of investment.
This same document also remarked that investors are generally at least as worthy of credit as owner-occupiers, noting the success found by this group so far in Sydney and Melbourne markets through value growth.
If regulations to manage investment do come into play in the future, it could mean changes to the way people are able to invest. But with financing for investment still coming through and breaking records, it suggests the environment is still ripe for purchase.
But with so many buyers about, you need every advantage you can get to leap ahead of the market. By engaging a buyers agent you'll get a wealth of information and know-how to stay in the top tier of this record investment activity.