Investors who have returned to inspections are squeezing out first-home buyers in the property market. A rising number of investors are securing property by offering higher, causing prices to increase. Some are trying to purchase a property rather than keep their money in the bank, where it is only earning low interest.
It comes following the property boom that has been triggered by owner-occupiers, determined to capitalize on cheap mortgages to move into bigger homes with space to work remotely. Investors usually come back to the market when prices increase and they see the probability of capital growth.
According to the latest Australia Bureau of Statistics data, investor loans throughout Australia grew 2.1% in April, hitting a record four-year high of $8.05 billion. In the same month, first-home buyer loans dropped by 1.9%.
In NSW, investor loans saw a 2.5% increase. While investor activity had improved in the past month, investors are coming back to purchase duplexes, villas and smaller homes. Though it is anticipated that they would drive growth in the unit market specifically in the coming months.
Investors will start feeling the pinch as they try to keep their eligibility for lower-priced stamp duty and government grants by paying less than the appropriate price limits.
The competition against investors will be difficult, and that could surely push prices over those limits. We saw this the last time investors dominated the property market in Newcastle. Many of those are cash buyers, which is noteworthy. The likely reason may be that keeping money in the bank doesn’t make sense given the low-interest rates and rising inflation.
With regards to rising prices, it will begin to trickle down, and with regards to driving competition up, this has been happening for the past month.
Another contributing factor are the rent-venters, comprising of first-home buyers priced out of their preferred location who rent where they want to live and purchase in another area.
Many have set their sights on purchasing investment properties in more reasonably priced states, including Queensland where prices have been increasing more modestly. Investor loans in the state rose 7.1% in April.
In Victoria, loans to investors increased 2.2%. Investors picked houses over units as they continue to feel the impact of the pandemic.
Numerous investors in Melbourne were searching beyond in country Victoria. People are buying property out of Melbourne with an eye to moving there in four or five years. This strategy offers good growth and good yield. It is practical for these lifestyle destinations.
However, investors were suffering FOMO like owner-occupiers, squeezing out first-home buyers as they are impacted first by affordability issues.
Investors who are returning are focusing more on the traditional property market than the apartment market. This indicates that what’s involved is likely Boomer money. Many of these investors were small, self-managed funds that were aiming to invest their cash on properties instead of keeping it in the bank.
These people are heavy hitters joining the same auctions. It means they can afford to pay more than the reserve and are more likely to be emotionally entangled in a bidding war.
In April, Melbourne posted a 69.9% clearance rate, according to Domain figures, and a 1.8% increase in housing prices to $750,562, according to CoreLogic data.