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PROPERTY INVESTORS RETURN TO MELBOURNE MARKET – BUT THEY’RE DISCERNING
Source: | Author:pro01a30d | Published time: 2020-02-28 | 303 Views | Share:

Investors are coming back into Melbourne’s improving housing market, new data shows, but potential buyers are choosy about the types of property they will snap up.

Older-style properties on land are popular, in contrast to the wave of off-the-plan units that were in demand during the last boom, while inner-city apartments that will rent well are also highly sought after.

Home loans to investors in Victoria jumped by 22 per cent between May and December last year, the latest ABS figures show.

Victorian investors borrowed $1.67 billion from the banks in December, some $300.7 million more than in May.

Buyers were buoyed by the result of last May’s federal election, which ensured tax benefits for investment properties would not be scrapped.

Low interest rates and changes to lending rules from the banks have also helped Melbourne’s property market quickly recover from the biggest downturn since the 1980s.

Although the unprecedented market turnaround – Melbourne’s house prices soared to a median $901,951 in the December quarter – has mostly been led by owner-occupiers, investors have been returning at pace in Victoria compared to elsewhere, Domain economist Trent Wiltshire said.

“It’s been an owner-occupier-led recovery and that’s been true across all states,” Mr Wiltshire said. “But since May, Melbourne has been one of the strongest markets for investors.”



Real estate agents have seen investors come back to the market in recent months, though the numbers are below those bidding and buying at the peak in 2017.

Dingle Partners director Robert Eggers, who sells in the CBD, said there were noticeably more investors back in the market looking to snap up a one-bedroom apartment in the inner city.

“One-beds are popular because they find they do rent really well,” Mr Eggers said.

Even so, first-home buyers were still one of the strongest buyer groups looking for these properties, with prices up to $600,000 meaning they could qualify for government assistance.

Buyers advocate Cate Bakos said the number of investors had grown after dramatically dropping in the downturn. Last year only 10 per cent of her clients were investors, she said.

Changes to lending criteria from the banks had made it harder for all buyers to get a loan, although it was now becoming easier for investors to get a mortgage.

Ms Bakos said investors were being sensitive about what they would buy. Many are looking for established and older properties in areas where yields were highest, rather than off-the-plan purchases.

“They’re now looking for properties with land – so older homes, villa units or townhouses that have land attached are popular,” Ms Bakos said.

Investor Ed Cheng has been hunting for an older home on land in inner Melbourne for the past four months.

Though he lives and works in Melbourne, he recently sold an investment property in Sydney, which he owned for about six years.

“My investment was an apartment in Surry Hills,” Mr Cheng said. “I could only afford an apartment given the budget and expected yield [rent] and I believed Sydney fundamentals were a bit stronger than Melbourne back then.”

Mr Cheng is now looking to buy a Victorian or Federation style home within 10 kilometres of Melbourne CBD, which he plans to use as an investment given the strength of the local market.

Investor lending also rose in NSW last year, albeit at a slower pace – up 14.5 per cent from May to December. The ACT rose 19.8 per cent over the same period, ABS figures show, while Queensland jumped 23.6 per cent.

Westpac senior economist Matthew Hassan said investors had been the “wildcard” of 2020, and while the numbers were growing, he didn’t expect they would lead the charge to push house prices higher throughout the year.

“They have been more restrained in part because of changes to lending conditions,” Mr Hassan said. “Our view is that investors would have been burnt by the price correction and would be reluctant to come back [into the market].”

Melissa Heagney

FEB 22, 2020

Source: Domain