Investors starting to return as WA proves affordable option
Investor-ownership is now the fastest-growing market segment, with the value of lending commitments rising by almost 12 per cent through the June quarter, according to CoreLogic data.
Based on mortgage activity, investor lending has outpaced owner-occupier lending, with first homebuyers showing a significant decrease – down 26 per cent between the March and June quarters.
Despite now comprising 19.2 per cent of housing demand, CoreLogic Asia Pacific Head Researcher Tim Lawless said investor lending was still historically low.
“Based on a 10-year average, investors have typically comprised about a quarter of mortgage demand,” he said.
“It’s likely investors will continue to become a larger component of the Western Australian housing market, incentivised by relatively low purchase prices compared with larger cities, strong rental market conditions and higher-than-average yields.”
Mr Lawless said a silver lining to the rise of investment could be an easing of rental pressure as more rental stock was added to the market.
Realmark Urban Executive Director Scott Fletcher said he had seen more investment purchases in recent months but noted these buyers were often being outbid by emotionally driven owner-occupiers.
“We’ve definitely seen eastern states investors come back into the market, particularly on the lower-end stock, looking for really affordable good-yielding properties,” he said.
“We’ve also found local investors coming back into the market. The participation rate was quite low when you compared it to the eastern states, but in the last quarter or two it has definitely increased.
“The only thing that’s probably dampened the participation rate, as far as purchases are concerned, is that they’re now competing with a lot of heavily emotionally driven owner-occupiers in multiple-offer environments.”
Mr Lawless noted Perth’s median house value in August was the lowest of any capital city in Australia, averaging just $555,666 – in comparison to the most expensive capital Sydney, with an average median house value of $1.29 million.
As for the rental market, Mr Fletcher said the urgency of tenants around Perth had slowed down slightly as the vacancy rate slowly increased, but he still expected WA investor-ownership to gradually rise over time.
“I think investor rates alone will keep going up for the next couple of years and that’s just based on the fact that we’ve been at historical lows,” he said.
“When you look at the affordability of Perth – the rental yields – I think there’s still quite a big way to go as far as capital growth is concerned. Some of the yields have slowed off a little bit because we’ve gone from close to zero per cent vacancy rate to around 1.5 per cent.”
Mr Fletcher said family-sized homes in the mid-tier bracket between $400,000 and $700,000 had been the most common areas for investors to return to the market.
Highlighting the confidence in the Perth property market, Mr Fletcher said he had seen a few larger investment purchases between the $1 million to $2 million mark, which was unlikely to be seen 12 months prior.
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