Property investors

Which state has been hit hardest by investor withdrawal? CoreLogic’s Eliza Owen

PHOTO: ABS housing finance data

Property investor activity in the Australian housing market has been falling has been falling since early 2015, after macroprudential policies were implemented in Australian mortgage lending.

Apart from a brief ‘bounce’ in 2016, investor participation has been consistently trending lower.

The latest ABS housing finance data shows the portion of housing finance for the purchase of property lent to investors fell to a fresh record low of 23.5% in August. This is significantly lower than the decade average of 36.1%.

The decline of the property investor has been brought about by multiple factors.

These include:

  • temporary policies implemented between 2014 and 2019, which limited lending products favoured by investors;
  • mortgage rate premiums for investor loans
  • less appetite for high LVR and interest only lending from the banking sector
  • less certainty around prospects for capital gains
  • high levels of housing construction which have softened rental returns; and,
  • the recent global pandemic, which has created a particular negative demand shock to the rental market, thereby further inhibiting returns.

BUT CAN WE EXPECT INVESTOR ACTIVITY TO KEEP DECLINING?

When comparing investor activity at the state level with CoreLogic rental data, there are clear differences between markets that are may appeal to investors, versus those where the retreat could last longer.

NSW. For the past decade, investor participation in mortgage activity averaged 41.9% across NSW and moved through a record high in late 2014 when investors comprised 55.6% of mortgage demand.

READ MORE VIA PROPERTY OBSERVER

MOST POPULAR