Investor resurgence fuels competition and house price growth in Melbourne

by | Nov 21, 2016 | property

This article was originally published by Christina Zhou via domain.com.au on 18th Nov 2016 | Image: Auctioneer Stephen Smith of Marshall White looks for a bid in Brighton earlier this year. Photo: Craig Sillitoe


Property investors have been out in force in Melbourne’s spring market, clawing back ground on auction battlefields and fuelling prices.


Investors retreated from the market when tougher lending criteria started to bite, but the prospect of changes to negative gearing earlier in the year and lower interest rates have lured them back into the market, experts say. 


Investor lending in Victoria jumped 2.9 per cent over September to $3.27 billion, Australian Bureau of Statistics data shows, which was 17.4 per cent higher than a year ago. But the total value for the first nine months remained 8.9 per cent lower than the same period last year. 


The value of investor lending accounted for 47.6 per cent of all lending for housing purchases in September, ahead of owner-occupiers and first home buyers, according to Domain Group chief economist Andrew Wilson.  


Photo: Hodges

The underbidder for this two-bedroom villa unit at 4/4 Glenmore Crescent, Black Rock, was an investor. Photo: Hodges


AMP Capital’s chief economist Shane Oliver believed increased investor activity could fuel prices growth.


The major banks had to quickly comply with the 10 per cent growth threshold that the Australian Prudential Regulatory Authority had imposed a year ago, he said. Lending swung around to owner-occupiers, and now it seemed to be swinging back to investors.


“That’s definitely going to have an impact on demand in the property market, and probably is also a factor explaining the continuing strength we’ve been seeing in recent months in Sydney, Melbourne and elsewhere,” Dr Oliver said.


Photo: Hodges2

An investor was bidding at this auction at 20 Victory Street in Sandringham. Photo: Hodges


“Auction clearance rates in Melbourne, for example, sort of took a bit of a hit about a year ago, but ever since then, they’ve been trending back up again, and I think the return of the investor is playing a big role in all of that.”


On Saturday, Melbourne clocked another strong clearance rate of 79 per cent from 832 reported auctions. 


Dr Wilson said the result was good news for sellers ahead of next weekend’s “bumper Super Saturday” of auctions.


Photo: Chris Hopkins

Investors are fuelling competition across the city. Photo: Chris Hopkins


The market saw a resurgence of investors during the federal election campaign, when the Labor party announced they might change negative gearing, Dr Wilson said. 


“That activated investor activity, just that fear of missing out … and then we had the interest rate cuts, and that fuelled that momentum,” he said.


“The other thing that attracts investors is prices growth, and Melbourne’s been growing quite strongly.


In addition to traditional investors, Marshall White director John Bongiorno said parents were now buying properties for their children, so they would not be priced out of the market in the future. 


Expatriates were also securing property with the intention of returning to Australia, he added. “They want to keep their foot in the real estate market over here.”


Hodges Sandringham auctioneer Paul Bond saw several investors on the field on Saturday, including a two-bedroom villa unit at 4/4 Glenmore Crescent, Black Rock.


The underbidder, an investor, fought it out with a father bidding on behalf of a first home buyer, before they dropped out at $766,000, he said. The reserve was $695,000.


“Without that investor in the market, then this property would have sold probably just over the reserve,” he said. 


In Sandringham, three bidders — including an investor — launched 20 Victory Street $100,000 over reserve with an opening bid of $1.8 million, and to a final price of $2,142,000. 


A family won the keys, and the underbidder was looking to lease the property in the short-term while they obtained plans and permits to build and renovate before moving in a few years time, Mr Bond said.