One of the most notable aspects of the current property boom is the absence of investors.
Despite the lowest mortgage rates on record, investor mortgage demand remains well below its 2015 peak while owner-occupier demand has surged to record high levels.
This is illustrated clearly in the next chart, which tracks ABS data on new mortgage commitments (excluding refinancings):
While investor mortgage commitments did grow by 11% in the 2020 calendar year, they remained 40% below their April 2020 peak. By contrast, owner-occupied mortgage commitments surged by 39% in 2020 to a level that is around 35% above prior peaks.
Sentiment is changing, however, with the REA’s latest Property Outlook Report reporting a sharp increase in investor inquiry at the end of 2020:
The recovery that investor enquiry staged in the final quarter of 2020 is set to extend into 2021. Importantly, larger markets such as Melbourne and Sydney, are no longer seeing declines in activity. Strong conditions in regional WA and Canberra has extended to regional NSW and regional SA.
I anticipate investors will join the property party in droves throughout this year, especially in markets outside of Sydney and Melbourne.
Rental yields are enticing outside of Sydney and Melbourne and rental growth is generally solid to strong outside of apartments:
When these yields are viewed against the record low mortgage rates on offer (especially fixed rates):
In markets outside of Sydney and Melbourne, investors have the opportunity to secure a property with neutral to positive gearing and the prospect of solid capital gains.
In short, the general investment case for Aussie property is too strong to ignore. Hence, investors are likely to enter the fray in increasing numbers throughout the year, which will pour more demand fuel on the housing bonfire.
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