Improving cashflow and even the prospect of stronger capital growth brought by lower interest rates are unlikely to entice hordes of property investors back into the market and trigger another investment boom, experts say.
While investor activity had picked up since the federal election and after APRA softened borrowers’ assessment criteria, tight lending had kept many investors at bay.
A poll of 1120 investors conducted by the Property Investment Professionals of Australia (PIPA) found that while 82 per cent of investors believe that now is a good time to invest in residential property, they were also held back by worries about getting finance and the state of the Australian economy.
PIPA, a lobby group for the property investment industry, also found that a quarter (25 per cent) of investors said they were unable to refinance an amount they were able to borrow previously.
This is a situation that Sydney-based investor Rob Martin knew too well.
“I own a number of properties and have built quite a bit of equity that I could access to invest more, however, it’s been a difficult process to tap that equity,” he said.
“When I refinanced four years ago, I was earning a lower income but I was able to access the full equity.
“I earn more money now, but I find it tougher to refinance now than before APRA started targeting investors a few years ago. I haven’t been able to release my equity in full, so coming up with a deposit for an investment property hasn’t been easy.”
“I’m looking at buying more because interest rates are so low and the buying conditions are still pretty good, but the lengthy process of getting finance is off-putting. It’s really difficult to get finance for investors like me even though the lenders have started lending more and have reduced rates on interest-only loans.”
NAB recently cut its interest-only mortgages for property investors by 30 basis points while ANZ and CBA reduced their’s by 25 basis points. Westpac cut their variable rate loans by 15 basis points.
Sharon Xie, credit manager at Homeloanexperts.com.au said so far investors were slow to take up the lower rates.
“We haven’t seen a big influx of investor loans after the rate cuts,” she said.
“Lenders still hold tight lending conditions and we haven’t seen big changes in credit policy in favour of investors recently.”
Currently, investors still only account for 25.9 per cent of the total mortgage demand, well down from the record highs of 43 per cent set in 2015 and below the long-term average of one-third of the mortgage demand.
“Investors are interested and many want to buy,” said Margaret Lomas, founder of Destiny Financial Solutions.
“We are seeing increased inquiry and this is a good indication that investors want to be active again.
“But the lowering of the serviceability rate requirement by APRA isn’t enough and it has only added a small amount of borrowing power to each investor. It’s not enough to help them to actually buy a property.”
The torturous process of getting a mortgage is making it difficult for investors to capitalise on the buying opportunities, Ms Lomas said.
“Despite lower mortgage rates, lenders are, if anything, making it harder for investors to borrow. Most investors max out their borrowing capacity at two or three properties now.
“Approvals are now taking months rather than days, and this isn’t conducive to securing a property. The compliance requirements are onerous and many investors just don’t have the time to satisfy them, and this is becoming a huge barrier to entry.
“Until this eases, most investors cannot invest, even if they have the desire to.”
Nila Sweeney, Financial Review, 4 October 2019