Expectations of strong capital growth and robust rental increases fuelled by record migration are enticing a growing pool of property investors like Marc Woolfson back into the market, despite higher interest rates.
“I think there are really good opportunities for property values to increase strongly due to limited housing supply and high migration,” he said.
Melbourne-based investor Marc Woolfson believes house prices could rise strongly over the medium term and is boosting his portfolio. Wayne Taylor
“I’m looking to buy at least two more properties, likely on the Gold Coast, to add to my portfolio over the coming months because there’s no way supply can keep up with all that demand. I think we’re in for a strong price and rental growth over the medium term.”
Mr Woolfson already owns four investment properties that are spread across the country. He said the latest interest rate increase had spooked some homebuyers, which opened up buying opportunities for investors like himself.
“Some buyers are holding back because they’re worried about interest rate rises, but if you have the borrowing capacity, I think now is a great time to buy because there’s less competition,” he said.
Property investors have largely overtaken owner-occupiers in driving lending growth since the start of the year, which coincided with the rebound in home values.
The value of new investment credit jumped by 15.7 per cent between January and September this year compared with a 4.6 per cent lift in owner-occupier borrowing in the same period, according to the Australian Bureau of Statistics.
“I think investors are probably more resilient in the marketplace than what I give them credit for because they’re positioning for medium to long-term growth,” said Tim Lawless, CoreLogic research director.
“They see the potential in making long-term capital gains based on the fact that housing supply will be constrained over the medium term.
“Rental markets will probably remain tight, so rental income should be consistent. They can also take advantage of what’s likely to be stronger buying conditions coming into next year as stock levels rise and competition among buyers becomes less significant.”
Expectations for price growth had hit a cyclical high after climbing by 4.8 per cent over the past three months to November, according to the Westpac–MI Consumer House Price Expectations Index.
The index is now in strongly optimistic territory, with a large majority of consumers (over 70 per cent) expecting prices to continue rising over the next 12 months.
Property investor and head of research at buyer’s agency InvestorKit, Arjun Paliwal, said investors were mostly motivated by fear of missing out and expectations that interest rates had peaked.
“We’ve had our biggest month ever in October, in terms of onboarding new investor clients, and then broke that record again in November, so clearly, investors are very active at the moment,” he said.
“Our clients told us they don’t want to miss out on the next upswing, particularly those who missed the COVID boom. They also want to get in before everyone returns to the market, so there’s a bit of opportunistic buying.”
Judo Bank chief economic adviser Warren Hogan said there has also been signs of speculative activity among investors.
“There’s a real sense of a speculative element in the market, which I call FOMO on steroids because of the relentless news about undersupply and high migration,” he said.
“I think news about high population growth, the housing crisis and Australia’s ability to meet those housing needs had a big impact on people’s motivation to invest.
“It gives them the confidence that despite the fact that property values are clearly very expensive – even after the sort of 8 per cent falls from last year – the idea that we’re going to have a shortage of residential property well into the future gives them a lot of confidence.
“So it’s not just fear that prices will go up, but they may not be able to actually get a property due to the perceived shortage.”
Originally published by Nila Sweeney in the Australian Financial Review. View article online HERE.