With a slowdown of investment across the country, yet high concentrations of investment activity in Sydney and Melbourne, property research firm CoreLogic has claimed that investing in these states “doesn’t make much sense”.
Over the last 12 months to July, ABS data shows the value of lending for investment loans was down by 15.7 per cent, to which CoreLogic research analyst Cameron Kusher highlighted what happens when a class of a vital property owner is restricted in its lending.
“Anyone directly or indirectly associated with housing finance has likely felt the pinch of heightened regulation and tighter credit policies,” Mr Kusher said.
“Less lending implies fewer home sales for real estate agents and developers, a reduction in building and pest inspections, less conveyancing for lawyers and a slump in stamp duty revenue for state governments.
“The decline has been most visible for investment loans where the value of lending is down [by] 15.7 per cent over the 12 months ending July 2018 and almost 31 per cent lower since peaking in April 2015.”
Today, investors make up 41 per cent of all mortgage demand, down from almost 55 per cent in May 2015.
New South Wales and Victoria make up the highest share of investor lending based on value, Mr Kusher claimed, with investors consisting of nearly 49 per cent of all lending in NSW and nearly 41 per cent in Victoria.
“Considering the short- to medium-term prospects for capital gains in these states is relatively low and rental yields remain close to the record lows, the concentration of investment activity in these states doesn’t make much sense,” Mr Kusher said.
“In all likelihood, we will continue to see investment activity trending lower, especially in NSW and Vic due to mortgage rate premiums for investors, tighter lending criteria, low rental yields and soft prospects for capital gains.
“Additionally, with a federal election around the corner, potential changes to negative gearing and capital gains tax concessions could be weighing on investor sentiment.”