Investor lending back to 2015 levels but first-home buyer activity still strong, industry experts report

Investors are back in the property market, but not enough to knock first-home buyers out of contention given their strong numbers, experts say.

It’s a big change from just 18 months ago – pre-COVID-19 – when investors had directly competed with first time buyers, forcing many out of the market altogether.

Investors are now more discerning about what and where they buy, industry experts report and, particularly in markets with plenty of available stock such as Sydney and Melbourne.

“I think the time when investors can buy anything and make money is over,” said Michelle May Buyers Agents principal Michelle May. “COVID has made people aware that not every property is worth investing in.”

Ms May, based in Sydney, said there was far less competition for rentals with travellers and international students now out of the market as borders remained closed because of coronavirus, and investors needed to find properties that would attract available tenants. 

That included luxury apartments or houses like the two-bedroom Victorian terrace in Annandale in Sydney’s inner west, which sold under the virtual hammer for $1.71 million at the weekend.

The number of investors coming back to the market is not at record levels but has improved greatly since last year.

Australian Bureau of Statistics lending indicators figures, released last week, showed loan commitment values for investors rose in May to their highest level since mid-2015.

ABS head of finance and wealth Katherine Keenan said investor loan commitments had soared by 116 per cent compared to May last year.

“The value of new loan commitments for investor housing rose 13.3 per cent [over the month] to $9.1 billion … which was the highest level since June 2015,” Ms Keenan said.

While the value has risen, investor loans made up 28 per cent of the total value of housing loan commitments in May, compared to 46 per cent in 2015, the data showed. 

“This reflects the very strong growth in owner-occupier loan commitments over the past year,” Ms Keenan said.

Despite a slight dip of 0.8 per cent, first-home buyer loan commitments were still at record highs and made up 32.7 per cent of all owner-occupier loan commitments. 

Melbourne-based buyers advocate Cate Bakos, from Cate Bakos Property, said investors were not providing the same amount of competition as they had in the past.

“They don’t stand a chance with first-home buyers in the market; they’re just so strong at the moment,” Ms Bakos said. “They’re out there with their parents backing and are being fuelled by FOMO (fear of missing out) and emotions, and investors can’t do that.

“They’ll minimise their returns if they go too high [on price].

“There’s a lot of interest in the regions, and the reason for that is the growth of rental returns. The market has outperformed [cities] because of COVID-19.”

While the markets in regional Victoria were booming, there was still a risk for investors with the future so hard to predict because of the pandemic.

In south-east Queensland, Propertyology head of research Simon Pressley said the growth in investor activity was welcomed, as a shortage of rental properties was seeing rents rise in areas including Noosa and the Gold Coast by thousands of dollars a year.

There were reports of people being forced to sleep in their cars, despite having work and money to pay rent, as they could not find an available rental, he said.

While COVID-19 had exacerbated a lack of rental stock, tougher lending criteria from the banks and possible changes to policies such as negative gearing had slowed the number of investors coming into the market for the past five years. 

“What Australia needs is for investor activity not to have all of these interruptions,” Mr Pressley said. “I think it will take a couple of years of investor activity to see the pressures start to ease on rising rents.”