SuperUser posted on May 09, 2013 11:21
Investors strong in NSW, but not elsewhere
- Author: Andrew Wilson
Date
This week's surprise decision by the Reserve Bank to cut interest rates will fuel investor interest in residential property.
Australians are passionate about investing in bricks and mortar and the combination of lower mortgage rates, rising property prices will be irresistible for many.
And falling mortgage rates obviously means lower interest on bank deposits, making housing even more tempting.
Australia's housing markets have experienced the best start to a year since 2010 when house prices were skyrocketing.
Australian Property Monitors reports that the national median house price rose by 1.7 per cent over the March quarter with Sydney up by 1.6 per cent, Melbourne up sharply by 3.6 per cent and Brisbane where house prices increased by 0.5 per cent.
However, interestingly, with the exception of NSW, investor activity is not a major driver of this surge in buyer activity and house price growth.
The Australian Bureau of Statistics reports unsurprisingly that the value of housing loans approved so far this year in Australia has increased by 10.5 per cent compared to the same period last year.
Most states have recorded increases in loan activity, led by Western Australia up 26.5 per cent and NSW up 9.7 over the year.
But only NSW, Victoria and Western Australia have recorded growth in investor activity over the past year. And of these, only NSW has a higher proportion of investors in the market compared with last year.
The proportion of investor loans approved in NSW so far this year has increased to a near all-time high of 50 per cent compared to 43 per cent over the same period last year.
Investor activity as a proportion of total home loans has fallen in both Victoria and Western Australia over the past year to just 40 per cent and 33 per cent respectively.
This clearly indicates that the underlying strength in those markets lies in owner-occupier activity, which has risen by 9.4 per cent in Victoria and 29.1 per cent in Western Australia over the past year.
Owner-occupier activity in NSW by contrast has fallen by 3.7 per cent over the 12 months due to the collapse in the first-home buyer market.
NSW is quite clearly the current powerhouse of residential investment in Australia accounting for 36 per cent of all investor activity compared to Victoria just 23 per cent.
By contrast NSW accounts for just 27.5 per cent of all owner-occupied loans approved in Australia which is just ahead of Victoria's 27 per cent.
No surprise that investors are currently highly active in NSW with a Sydney housing market characterised by record house prices that continue to increase, high and rising rents , low vacancy rates and a solid local economy.
This latest rate cut will act to drive increased residential investor activity in other capital city markets, particularly the higher rental yield markets of Perth and Brisbane.