Investors are significant contributors to Australian housing market activity driven by a strong culture of private sector bricks and mortar investment.
Australia’s housing markets have experienced the best start to a year since 2010 when house prices were skyrocketing. APM reports that the national median house price rose by 1.7 percent over the March quarter with Sydney up by 1.6 percent, Melbourne up sharply by 3.6 percent and Brisbane where house prices increased by 0.5 percent.
With the exception of New South Wales, investor activity however is not a major driver of this surge in buyer activity and house price growth.
The ABS reports unsurprisingly that the value of housing loans approved so far this year in Australia has increased by 10.5 percent compared to the same period last year. All the major states have recorded increases in loan activity led by Western Australia up 26.5 percent and New South Wales up 9.7 over the year.
Only New South Wales, Victoria and Western Australia have recorded growth in investor activity over the past year and of these only New South Wales has recorded an increase in the proportion of inventor activity in their local markets.
The proportion of investor loans approved in New South Wales so far this year has increased to a near all-time high of 50 percent compared to 43 percent over the same period last year.
Investor activity as a proportion of total home loans has however fallen in both Victoria and Western Australia over the past year to just 40 percent and 33 percent respectively. This clearly indicates that the underlying strength in these markets lies in owner –occupier activity which has risen by 9.4 percent in Victoria and 29.1 percent in Western Australia over the past year.
Owner-occupier activity in New South Wales by contrast has fallen by 3.7 percent over the past year due to the collapse in first home buyer activity in that state.
New South Wales is clearly the current powerhouse of residential investment in Australia accounting for 36 percent of all investor activity compared to Victoria just 23 percent. By contrast New South Wales accounts for just 27.5 percent of all owner-occupied loans approved in Australia which is just ahead of Victoria’s 27 percent.
No surprise that investors are currently highly active in New South Wales with a Sydney housing market characterised by record house prices that continue to increase, high and rising rents, low vacancy rates and a solid local economy.
Dr Andrew Wilson is Senior Economist for Australian Property Monitors