Investors still missing in action

The total rate of new loan commitments for housing and the value of owner-occupier home loan commitments each reached record highs in December 2020, according to the latest Australian Bureau of Statistics data, however investors are still relatively absent from the Perth marketplace.

Nationally, new loan commitments rose 8.6 per cent to $26 billion in December 2020, and when you delve into the Perth numbers there are three distinct markets.

First homebuyer lending significantly rose, with 2469 new loan commitments, while owner-occupiers enjoyed a record high new loan commitment value of $2.187 billion.

Dragging its feet however is the investor market, which only represented $378 million in finance, rising from a record low of $164 million in April 2020.

Realmark Coastal Director Nathan Burbridge has noticed this lack of activity.

“What I am experiencing in my marketplace is that there are a lot of tenants that have already sold up and a lot of previous homeowners that are now in the market big time,” he said. “Whereas what I think will happen around March and April – once the government padlock comes off – is that there will be a mass exodus of tenants that have bought something.

“This is the pandemonium at the moment – where most of the buyer hype is coming from.

“Out of the last 20-odd sales I have done, there was about two investors.”

Western Australia’s rate of investor new loan commitments pale in comparison to New South Wales, Victoria and Queensland, with Sydney-based Property Investment Professionals of Australia Chairman Peter Koulizos saying investment activity has been growing nationally over recent months, which is a situation set to ramp up this year.

Mr Koulizos said with owner-occupiers, investors and first homebuyers out in force at the same time, there was only one way for property prices to go – up.

“If you add low supply levels, as well as once-in-a-generation interest rates into the mix, property markets are set for strong conditions for the foreseeable future in my opinion,” he said.

However, whether investors will return to the Perth marketplace or not is still in the air.

The current level of investor new loan commitments is at its highest since April 2017, but when looking at a longer timeline it is less impressive, especially when compared to the more than $1 billion in new loan commitments from investors seen in September 2014 and the high of May 2006 ($1.139 billion).

While investors are not out in force, the general market is performing strongly, according to Mr Burbridge.

“Before the lockdown, I had 137 groups through one of my homes, eight offers and sold for $150,000 more than the seller’s expectations,” he said. “We have had some good growth over the last 12 months.”

According to CoreLogic’s February Hedonic Home Value Index, Perth property prices have risen 1.6 per cent for the month, up 3.4 per cent for the year.

REIWA President Damian Collins said the rental moratorium, which froze rent prices, had impeded investors entry into the market and the local rental market needed more investors to keep a lid on rent price growth.

“There were just 2826 properties for rent in January 2021, compared to 5784 in 2020, which is a drastic reduction in stock and we currently have a severe rental shortage,” Mr Collins said.

“While in the short term these conditions will entice investors back to the market, it is imperative the State Government keeps their promise to end the rental moratorium on March 28, 2021 to ensure the situation does not worsen.”

While rents have risen in recent months, many pundits have predicted further price growth once the rent moratorium ends, and many renters whose leases are up have already felt the sting.

Mr Burbridge said he didn’t see investors returning to the market for a little bit longer, as he noted that the positive return on investment in the stock market was currently a more attractive proposition.

“I think it will be a long, drawn out process, some will come in later on in the year when they see the market increasing and buyer sentiment and prices going up, but they haven’t realised yet they are 18 months behind the eight ball,” he said.