If you're a property investor or interested in jumping into the market, you may be wondering a few things. Namely, what is the state of Australia's investment property market now, and where is it going?
Inevitably, the success and downfall of property investment is tied to what's happening in the real estate market. With this in mind, there are plenty of hints and signs to be gleaned from CoreLogic RP Data's July 2015 Quarterly Review.
Over this period, residential property was Australia's single most valuable asset class, estimated to be worth a whopping $6 trillion.
This is a direct result of Australia experiencing an 11.1 per cent growth in housing prices across the combined capital cities, in the 12 months leading up to July. It comes to no one's surprise that the two cities that saw the most dramatic growth were Melbourne and Sydney, seeing respective dwelling value increases of 11.5 and 18.4 per cent. Sydney in particular has enjoyed headline-making numbers, with units and houses reaching respective median prices of $660,000 and $921,500.
These figures can only mean good news for certain property investors – those who have already slipped into the market before this surge in growth, and those who sold their property during this peak and pocketed massive profits. For those trying to buy an investment property now, it may feel like you're a little late to the party.
However, a recent publication from investment bank Morgan Stanley indicates there may be no reason to fret. "Housing activity has peaked, and we believe the macroprudential induced cooling off period will take growth momentum lower, lift recession risks, and amplify the need for easier fiscal policy," says the paper.
In this instance, it refers to the Australian Prudential Regulation Authority (APRA) pressuring banks to tighten their lending. This will help to slow the climb in housing prices, especially in investment-heavy cities.
Supply on the way
Another reason to expect price growth to cool is the wave of new housing coming in the near future. CoreLogic's quarterly review reveals 220,423 buildings were approved for construction over the 12 months to June. This figure is a record high for Australia.
What this means is that investors can expect not only a stabilisation of prices but a good pick of brand new real estate. A bigger selection means it'll be easier to find a property that'll meet your investment goals and capability. When it comes to the property management side of things, it'll certainly be less of a headache without having to deal with upgrades, repairs and other costly work a worn property might need.
Home loans and cash rates
The Reserve Bank kept the nation's cash rate at 2 per cent in September for the fourth month in a row. This has led to all-time low interest rates on loans, making it an ideal time to hunt for a less costly investment property mortgage. As seen on the ASX, most of the market predicts the cash rate to hold, while others are even expecting it to cut further. In light of this, investors are likely to enjoy this season of low interest rates for now and the near future.
As mentioned before, however, the APRA is clamping down on investment lending. This could make it more challenging than previously to secure that loan.
This won't just apply to you, but all property investors. If you want to rise above the rest and get maximise your chance of getting that investment loan, be sure to stick with mortgage broking professionals. Those at The REIN Group will guide you through every step of the way to help you realise your investment dreams.