INVESTOR confidence in the property market is improving following a slow 18 months for the residential sector.
Low interest rates coupled with improving yields of more than 5 per cent are attracting investors, amid expectations that the market has bottomed out.
“I think we have seen some changes in the investor psyche,” RP Data national director Tim Lawless said.
“We are starting to see quite a steep upward trend in investor numbers in the marketplace. When we start to see a trend like that, it really does mean that there has been a turning of the tide, and we are likely to see more investors flowing into the market from here.”
Several indicators published over the past few weeks point to a strong upward trend in prices and a revival of investor interest in the sector.
The RP Data-Rismark index shows for the year to May, the average value of a house in Australia rose by 1.6 per cent.
The rate of growth has started to pick up; in the first five months of 2009, the average price rose 3.9 per cent, an annualised rate of 9.4 per cent.
However, not every State posted an improving outlook. Prices were down 4.6 per cent in Perth over the year.
Still, low interest rates and rising rents are giving a “buy” signal to investors.
The 2009 edition of mortgage insurer Genworth Financial’s mortgage trends report, released this month, confirms that investors are back in the market.
Forty-three per cent of respondents to the survey said it was a good time to buy a residential investment property, up from 33 per cent in the 2008 survey. Of those who think it is a good time to invest, 84 per cent said it was because property prices had come down, 78 per cent said interest rates were favourable, and 51 per cent said the rental shortage would lead to high rental income.
In its June economic forecast, BIS Shrapnel said demand from investors and “upgraders” was growing and would more than make up for any slack as first-home buyer activity started to slacken off later this year. It expects property prices to move up slowly until unemployment peaks early in the 2010-11 financial year. before returning to double-digit growth in 2011-12. The group forecasts that Sydney will lead the way with 19 per cent price appreciation over the three years to June 2012. Despite its recent malaise, Perth prices are expected to grow by 12 per cent in the same period. n