Property investor activity grows 67.8% year-on-year
The official data confirms anecdotal evidence – property investors are very active right now.
Property investors took out $33.7 billion of home loans in January, according to the Australian Bureau of Statistics, marking the second consecutive month in which investors set a borrowing record.
To illustrate how investment activity has surged in recent times, investors borrowed 67.8% more in January than the year before.
This increase has occurred throughout the country – here is how it looks state by state:
• Queensland = up 94% over the year to January
• South Australia = 81%
• Victoria = 67%
• New South Wales = 64%
• Western Australia = 56%
• ACT = 42%
• Northern Territory = 33%
• Tasmania = 32%
Australia’s vacancy rate (the share of untenanted rental properties) is at an incredibly low of 1.1%, according to the latest data from Domain.
That means most property investors are finding it easy to secure quality tenants. It also gives many investors the chance to raise rents, because demand for rental accommodation is so high right now.
Price gap between houses and units hits record level
Buying a typical house will now cost almost 30% more than buying the typical unit.
CoreLogic has reported that, at the end of February, Australia’s median house price was 29.8% higher than its median unit price – a record gap.
To put it in dollar terms, median house prices are $791,400 and $609,800 for units, which means the gap is almost $182,000.
That gap has significantly widened in the past two years:
• February 2020 gap = 8.3% / $43,000
• February 2021 gap = 16.2% / $87,000
It’s possible the house-unit price gap will further widen, because now that so many Australians are working from home, more people want a dedicated home office, which could lead to increased demand for houses.
On the other hand, it’s also possible the gap will narrow, because with houses looking relatively expensive and units relatively cheap, demand might shift from the former to the latter.
Why your student loan can make it harder to get a home loan
When it comes to classifying debt as either ‘good’ or ‘bad’, borrowing to fund your education or buy a property are generally regarded as good debt, because both tend to deliver a return on investment.
However, you may not realise that HECS-HELP debt may reduce your borrowing capacity when it comes time to applying for a home loan. That’s because, if hundreds of dollars per month are being diverted from your salary to repay your student debt, that means you have less money to devote to mortgage repayments.
So does that mean you should repay your HECS-HELP loan as soon as possible?
That depends on a number of factors such as the remaining balance of the HECS-HELP debt, the required repayment amount and the available savings.
More and more Australians choosing brokers over banks
Mortgage brokers accounted for 66.5% of all new home loans in the December Quarter, according to the latest data from research group Comparator.
This is a record result and proves a solid upward trend of customer choice, favouring the 3rd party broker channel over direct to bank.
This December Quarter record succeeds previous highs of 59.4% in the December 2020 Quarter and 55.3% in the December 2019 Quarter.
Mike Felton, the CEO of the Mortgage & Finance Association of Australia, said the strong increase in mortgage broker market share shows that consumers really value the service, competition and choice that brokers provide.
When you visit a bank for home loan advice, the bank will only tell you about its own products, even if it knows another lender is offering a better home loan. But when you visit a broker, the broker will compare interest rates, loan features and borrowing criteria from a range of lenders.
The broker will also negotiate with lenders on your behalf. That significantly increases your chances of getting a great loan that’s tailored to your unique circumstances.
TAG Finance and Loans
Sal Cinque | CEO
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Disclaimer: The information contained on this page is general in nature. Professional advice should be sought before acting on any aspect on this page. TAG Finance and Loans Pty Ltd ABN 25 609 906 863 Credit Representative Number 483873 National Mortgage Brokers Pty Ltd ABN 88 093 874 376 Australian Credit License 391209.