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June 29, 2021 by ash

Why investors are following first homebuyers into the market

In good news for our state’s tightening rental market, investor finance in Western Australia increased 164 per cent ($453 million up from $171 million) in April 2021 compared to April 2020, according to the Australian Bureau of Statistics (ABS).

This is on top of the March 2021 improvement, which saw investor finance come in at $441 million, up 94 per cent from $227 million in March 2020.

The trend is clear and the reason for it is obvious – there’s never been a better time to invest. Strong capital gains, record-low interest rates and a volatile stock market are making the perfect storm for investing in the nation’s safest asset – bricks and mortar.

Price gains for apartments are beating those for houses in a growing number of suburbs around the country, as worsening affordability and a lack of stock encourage buyers into high-rise living.

Latest data from CoreLogic found that apartments around Australia have exceeded house price growth, with affluent areas boasting the most positive movement.

Apartments in Leederville saw a price growth of 9.7 per cent over the past 12 months, in comparison to the 1.7 per cent posted for houses. The gap in prices also spiked to about 50 per cent during the same period.

One of Australia’s biggest mortgage brokers, Australian Finance Group (AFG), expects property investors will continue returning to the market, potentially filling the gap left by retreating first homebuyers.

After figures early this month showed house prices had again surged in May, AFG CEO David Bailey said investors were making up a bigger share of its new lending and he expected the trend had further to run.

“Coming through the other side of the pandemic, my view is that as first homebuyers, particularly those who look at apartments and smaller places and so forth, come out of the market that volume will probably be replaced by investors,” he said.

It’s a trend common of housing booms – the retreat of first homebuyers is followed by stronger lending to investors due to the latter being typically more able to access credit, as they’re likely to already own property and have higher incomes.

So, while rising prices may not be great news for first homebuyers who may find the market increasingly difficult to enter, for property investors rising prices are an incentive to get into the market to take advantage of what they hope will be yet another long-term period of very strong housing price growth.

Banks are adding to the investor frenzy, as they compete for a share of the burgeoning investor pie. Late last month National Australia Bank announced it was cutting its variable principle and interest rate for investors by 30 basis points to 2.79 per cent – the lowest variable rate of a loan in that category across the big four banks.

So, whether you’re a first homebuyer or investor, it’s clear there’s never been a better time to invest and that time is of the essence.