Investor demand making a comeback

Adam Smith 13 September 2016

house graph photoInvestor demand for property is continuing to recover, new analysis indicates.

Figures from the Australian Bureau of Statistics show a 0.5% rise for investment lending for July. CoreLogic researcher Cameron Kusher said this marked the third consecutive month of rises for investor lending, suggesting a comeback in demand.

“Investor participation has slowed significantly since APRA introduced the 10% cap on annual growth in investor credit however, over recent months it has started to pick up again,” Kusher said.

Kusher said investor lending was still 19.1% lower than its peak in April 2015. However, he argued that property remained an attractive asset class for investors.

“Although gross rental yields are at historic low levels, you can still understand why demand from this market segment is rising.  Even with record low yields, returns are still superior to term deposits and other safe asset classes.  When you factor in the capital growth along with the rental returns, the asset class remains much more attractive than others,” he said.

Kusher added that investors could face challenges, though, as power in the rental market shifts toward tenants.

“The challenge for investors from here will be ensuring that their property remains occupied throughout the year as rental growth slows and vacancy rates shift higher,” Kusher said.

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