Why investors follow first-time buyers in the market

Good news for our state’s tight rental market, investor funding in Western Australia increased 164% ($ 453 million from $ 171 million) in April 2021 compared to April 2020, according to the Australian Bureau of Statistics (ABS).

This is in addition to the improvement in March 2021, which saw investor funding rise to $ 441 million, up 94% from $ 227 million in March 2020.

The trend is clear and the reason is obvious: there has never been a better time to invest. Strong capital gains, record interest rates and a volatile stock market are the perfect storm to invest in the country’s safest asset – bricks and mortar.

Price increases for apartments are outpacing those for homes in a growing number of suburbs across the country, as deteriorating affordability and lack of inventory encourage buyers to live in high-rise buildings.

The latest data from CoreLogic revealed that apartments in Australia have outpaced house price growth, with wealthier areas showing the most positive movement.

Apartments in Leederville have seen their prices increase 9.7% over the past 12 months, compared to 1.7% posted for houses. The price differential has also reached around 50 percent over the same period.

One of Australia’s largest mortgage brokers, Australian Finance Group (AFG), expects real estate investors to keep returning to the market, potentially filling the void left by the withdrawal of early home buyers.

After figures earlier this month showed house prices rose again in May, AFG CEO David Bailey said investors made up a larger share of his new loans and that he ‘expected the trend to continue.

“Moving to the other side of the pandemic, my take is that as first-time homebuyers, especially those looking at apartments and smaller places, etc., come out of the market, that volume will be probably replaced by investors, ”he said.

This is a common trend with real estate booms – the decline in first-time buyers is followed by increased lending to investors, with investors generally being better able to access credit, as they are likely already homeowners and have more income. high.

So while rising prices may not be good news for first-time buyers who may find the market increasingly difficult to enter, for real estate investors, rising prices are an incentive to enter the market for take advantage of what they hope will be yet another period of very strong house price growth.

Banks are adding to the investor frenzy as they vie for a share of the booming investor pie. At the end of last month, the National Australia Bank announced that it was reducing its variable principle and its interest rate for investors by 30 basis points to 2.79% – the lowest variable rate on a loan. of this category among the big four banks.

So whether you’re a first-time buyer or an investor, it’s clear that there has never been a better time to invest and time is of the essence.


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