Investors are showing renewed confidence in Australia’s property market.
In March 2021, new loan commitments for housing rose 5.5% month-on-month to a new record high of $30.2 billion – with investor lending accounting for more than half of that rise.
Just a year ago, investor lending was at its lowest in 20 years, so this sharp increase in new loan commitments is an incredible turnaround. Indications are that this could be the start of an investor boom that may run for some time.
So, why are investors jumping back into the market? For three main reasons.
1. Record-low interest rates
The Reserve Bank kept the cash rate at a record-low 0.10% at its most recent board meeting and confirmed it is unlikely to raise official interest rates until at least 2024. As a result, it’s possible to get an investment loan with a ‘2’ in front of it, which means it’s never been cheaper to repay a mortgage.
Bear in mind that you can split your home loan, so part of it has a fixed rate and part of it a variable rate. That way, you get certainty on the fixed portion of the loan, while being able to repay the variable portion ahead of schedule.
2. Positive property price forecasts
On the back of low-interest rates and a strong uptick in housing demand, several major banks are predicting a rise in property prices in 2021. ANZ forecasts prices will increase by 17% in 2021, Westpac 15% and Commonwealth Bank 10%.
3. Fear of missing out
With low interest rates and rising property prices, FOMO is prompting investors to jump back into the market. Investors should take a long-term view; that said, anyone who buys a quality property in a quality location right now could enjoy an immediate capital gain.
The current market is an investor’s dream. But, in a booming market, it’s easy to overpay for the wrong property if you don’t do your research.