Investors flocked back to the residential property market in February, reflecting increasingly positive sentiment about housing and aggressive competition in the home loan market.
Investor finance accounted for 8.9 per cent of the total value of loans at $6.594 billion, seasonally adjusted, the Australian Bureau of Statistics said today.
Investors piled into property in February despite three rate rises in 2006.
“Clearly, the combination of a strong labour market, prospectively steady interest rates, rising rents and tight rental market supply have raised investor interest in residential property,” said Shane Lee, an economist with Citigroup.
The Mortgage and Finance Association of Australia’s chief executive, Phil Naylor, said the strong housing loan statistics figures showed buyer confidence in property was rising, particularly among those buying investment properties.
“The most noticeable increase was in loans taken out by property investors: up by 8.9 per cent on a seasonally adjusted basis during February. This is one of the strongest increases we have seen in a long time and appears to put an end to recent reticence toward investment property,” Mr Naylor said.
Home buyers more upbeat
Australians are also becoming more upbeat about house prices. A survey last month by News.com.au and polling firm Coredata found almost one in two Australians, or 43 per cent, believe property prices will rise over the next three months.
Just one in five of the 3010 people surveyed in March – or 22 per cent –thought house prices would fall over the next quarter, well down from previous surveys.
Loan competition boosts lending
Mr Lee said aggressive pricing on home loans by banks had lowered interest costs for new borrowers and was helping to underpin the turnaround in lending.
“Competition in the banking sector also appears to be underpinning the turnaround in demand for housing as well, with the bank’s market share now back to 2000 levels,” said Mr Lee.
Bank lending now accounts for about 70 per cent of home loans taken by borrowers. In June 2002, the banks only held around 60 per cent of new home loan approvals, he said.
“The aggressive market pricing has also won back market share from the mortgage originators, building societies and credit union that was lost during the past housing boom,” Mr Lee said.
The prospect of higher official interest rates was also assisting to encourage borrowers to fix interest rates on home loans, with 20 per cent of new loans fixed for a term greater than two years. The long term average percentage of fixed loan approvals is around 11 per cent, said Mr Lee.
Source: News.com.au
