Investors are scrambling for a piece of the Australian property market and the recent rates cuts will do little to abate the frenzy. Following the release of the Australian Bureau of Statistics housing finance lending figures for December 2014, CoreLogic RP Data research shows that the proportion of investment home loans fell just short of the October 2003 record.
CoreLogic analysis has some interesting insights into where investors are focussing their strategies. While house prices surge across the country, rental yields are falling – but this has not stopped investors from taking out $12.6 billion in housing commitments in December, a 6 per cent rise from the previous month. This suggests that long term capital gain is top of their priority list, with rates cuts facilitating the extraordinary number of home loans.
Property investment loans accounted for 41 per cent of all housing commitments in December, which is just below the 41.2 per cent record set in October 2003. Investors continue to pour commitments into established property with a staggering $11.6 billion taken out for these purchases. However, home loans for new builds have reached a higher peak. They may only contribute a small number of properties to the housing market, but investors are grabbing the limited supply when they can.
Commitments for new homes only accounted for $1 billion of investor loans in December, but this is the highest level since December 2002. In fact, the value of these loans grew by 59.8 per cent over the year – while established properties only grew 16.1 per cent over the same period.
Limited supply of new houses is being blamed on the rising price of residential land. CoreLogic Head of Research Tim Lawless said this, in turn, is contributing to the growing cost of housing, while more vacant land would enable more construction loans.
“Ideally we should be seeing more land brought to the market and sold during this period of low borrowing costs,” he said.
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