Investor activity picks up for real estate in Australia

Australia’s property market has seen substantial growth over the past year. With interest rates for home loans at an appealing level, more and more people are deciding to jump head-first into the market and secure a property for sale.

You might be asking yourself who is buying all this property – and recent research suggests a lot of it is being bought by investors.

The Reserve Bank of Australia (RBA) released its Financial Stability Review, which analysed the country’s property market, wealth and other economic measures.

In the review, the RBA identified that investor activity is heating up. According to the bank, loan approvals for investors currently account for 40 per cent of total value of approvals. The RBA notes this level is similar to what was seen in the 2000s, when the Australian property market was going through “a period of rapid housing price inflation and strong investor demand”.

Unsurprisingly, investors now account for 20 per cent of total lending from banks, the RBA said.

In addition to the RBA’s findings, July data from the Australian Bureau of Statistics (ABS) showed that demand from investors reached a high. Over the month, there was a 6.8 per cent increase in value of investment lending, seasonally adjusted.

Overall property lending increased by 2.7 per cent, including owner occupiers, refinancers, and investors. However, the value of lending to owner occupiers hasn’t increased nearly as much as lending to investors has. Over July the ABS recorded a 0.3 per cent rise in trend terms, or 0 per cent seasonally adjusted.

Where are investors buying houses for sale?

There has been a fair amount of commentary in the media about Sydney being a hotspot for investors, and the Financial Stability Review confirms this.

The RBA noted that Sydney was where “the momentum in investor housing activity has been concentrated”. In fact, the report stated that loan approvals for investors were approximately 90 per cent higher in New South Wales compared to the last two years.

Real estate in Melbourne was also pinpointed as another popular area for investors, although not as significant as Sydney.

This was reinforced by comments from RP Data research director Tim Lawless, who explained why Sydney and Melbourne have been standout cities.

“Investors are mostly concentrated across the Sydney and Melbourne apartment markets where capital gains have been strong but yields have been pushed very low,” he said in a statement.

While Mr Lawless said Sydney and Melbourne are seeing strong capital gains, he noted that other capital cities could offer investors much more.