Hope Island residential property auction

Investors Return to the Market Sending Property Prices Higher

First-home buyers are starting to be squeezed out of the property market by investors that are providing stiff competition at property auctions.

As more investors are signing up to bid on residential properties, they are sending prices higher. Many investors are set on buying ‘bricks and mortar’ as a result of the low-interest rate environment rather than just leaving money in the bank at very low interest.

This follows the most recent housing boom, which was sustained by owner-occupiers that were eager to capitalise on low-cost mortgages to relocate into more sizable residences with space to work remotely.

As property prices rise and Investors can see the potential for capital growth, they typically return to the property market.

The latest Australia Bureau of Statistics data shows that investor loans across Australia increased by 2.1 per cent in April, reaching a record four-year high of $8.05 billion. While in the same month, first-home buyer loans dropped 1.9 per cent.

New_loan_commitments_total_housing_seasonally_adjusted_values_Australia_2_kyntwjNew_loan_commitments_to_owner_occupier_first_home_buyers_seasonally_adjusted_number_Australia_3_fmlupwWhile investor activity has picked up in the past month across Australia, they could fuel price growth in the unit market in coming months.

Investors are taking confidence in an improving rental market and seeing apartments as good rental yields.

First-home buyers will start to feel the squeeze in the housing market as they attempt to stay eligible for discounted stamp duty and government grants by paying less than the relevant price thresholds.

There is a vast influx of investors coming to market at this moment in time. With interest rates so low and inflation on the rise, cash in the bank is kind of worthless. It is the old chase for yield and the flight to safety.

Indeed, rent-vesters, who are first-home buyers priced out of their choice of location who rent where they want to live and purchase an investment elsewhere, have been fanning the fire.

Many have gone to buying investment properties in more affordable states, including Queensland where price rises have been more moderate. In April, loans to investors in the sunshine state hopped 7.1 per cent.

Yet, investors are experiencing FOMO (Fear Of Missing Out) like owner-occupiers, pushing out first-home buyers who are first hit by affordability constraints.

We are seeing a steady return of the investor that is so far zeroing in on the traditional housing market rather than the apartment market. This could suggest that its presumably Baby Boomer money being spent. As many investors of that generation with self-managed super funds have been looking to park their cash in property rather than in financial institutions.

They are more heavy hitters attending auctions. By heavy hitters, essentially mean individuals who have the capacity to pay more than the reserve who have become emotionally involved. When this happens, the results speak for themselves at an auction.

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