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Property investment up 31% – should first home buyers worry?


Investment lending has risen through 2021 and experts think it will continue. But it's not all bad news for home buyers.

First home buyers have driven Australia's booming property prices in the last few months. Buyers have rushed to take advantage of record-low home loan rates, supportive policies and prices that had fallen (albeit slightly) during the pandemic.

But the latest lending figures show that investment activity is growing again, with loans for investment purposes 31% higher than a year ago. This could spell trouble for first home buyers trying to enter the market.

Home buyer interest remains strong and is 55.2% higher than it was this time last year. But lending for home buyers fell 1.8% month on month, while investment lending rose 4.5%. These numbers don't represent a complete market shift from buyers to investors but could be the start of one.

Buyer's advocate Cate Bakos told Finder she's seeing an increase in investor activity.

"The majority of investors I speak to have recognised that the holding costs have significantly diminished with the help of lower interest rates. It is notable that houses across the country are exhibiting increased rental too – an encouraging sign for an investor," said Bakos.

Investment expert Michael Yardney said investors are being drawn back to the market by "Historically low interest rates, booming property markets and more certainty in job security and our economic future".

The real question for first home buyers is how will this affect their chances of getting a property? There are only so many properties to go around, and an influx of investors inevitably drives prices up.

"In general, first homebuyers and property investors compete for similar properties in similar price ranges, and when investors come in to the market they often push out first home buyers," said Yardney.

Bakos doubts that investor activity will impact home buyers too much right now. "First home buyers have a lot of support, a lot of incentives and at present, seem to be really driving prices. Investors have a limit when it comes to pricing – they have to be mindful of returns and holding costs.

"Our environment is very different now to what it was in the heady days of 2014-2016 when investor activity was much greater."

With interest rates so low and policy support in place, first home buyers still have some advantages. But if property prices keep rising, regardless of who is driving the demand, property will become a more attractive sector for investors.

"If history repeats itself," said Yardney, "it is likely that a whole new generation of property investors will enter our housing markets as they keep reading how property values keep rising and investors are making more money."

Hoping to enter the market? Check out our tips for first home buyers or compare home loans for low deposit borrowers.

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