Rising home values, record-low interest rates and strong rental yields are tempting investors back in to the market, with Queensland shaping up as one of the hottest destinations for those with cash to splash.
New figures show that the value of home loans taken out by investors has risen 11.6 per cent nationally over the past three months, marking the fastest growth in the value of investment loan commitments since November 2016.
“The rise in investment activity comes after a period of relative inactivity, with investor participation falling from 43 per cent of market activity in mid 2015 to a recent record low of 25.8 per cent in July this year,” the latest CoreLogic Property Pulse reports.
CoreLogic’s head of research Tim Lawless said the slump in investor activity was the result of several factors, predominantly policies that limited investment credit growth and capped interest only lending combined with the housing slowdown.
“More recently, housing market conditions have turned a corner, with values rising across five of the eight capital cities over the September quarter and three of the broad ‘rest of state’ region,” Mr Lawless said, noting those improved capital gains prospects plus the loosening of credit policies were likely bringing investors back.
Every state and territory has seen a lift in the value of investment loans, with the largest rise over the three months to the end of August in Victoria and Queensland, where the value of investment home loan commitments was up 19.1 per cent, according to the report.
Tasmania and the ACT were the only other states or territories that recorded a double digit rise in the value of loans taken out by investors during the past three months, with 14.1 per cent and 12.8 per cent respectively.
But investment activity continues to be most concentrated in NSW, where investors comprise 31.2 per cent of the investor demand for mortgages. That state saw a 6.8 per cent rise in the value of investor loans.
In Queensland, investors comprise 19.6 per cent of the market, according to CoreLogic. “Looking forward there is a strong likelihood that investor activity will increase further,” Mr Lawless said.
“The long term average shows investors are typically around one third of mortgage demand, implying investors are currently under represented in the market.
“As investment activity rises we could see increased price pressures as this sector of the market tends to be more competitive in setting new price benchmarks.”
But the upswing in investor activity could lead to fewer first home buyers due to competition in the market, according to the report.
And that competition can already be seen in the Brisbane market, with agents actively pitching properties to budget conscious first home buyers and ‘savvy investors’ at the same time, often noting rental yields and occupancy rates as selling points.