The restricted access to investment lending has pushed many investors in Australia to consider other options, according to a new study by the Property Investment Professionals of Australia.
Around three in five property investors are now likely to consider a non-major bank due to the difficulties of obtaining investment financing and the conclusion of the royal banking commission, said PIPA chairman Peter Koulizos.
In fact, over one in four investors had already secured a loan from non-major lenders over the past year. The top-cited reasons were cheaper interest rates and higher borrowing power.
Around 27% of investors said they would consider refinancing their loan for an interest rate that is 50-basis-point lower.
“Given tight lending conditions and the financial sector’s response to the royal banking commission, a staggering 25% of respondents have found they were unable to refinance an amount they were able to borrow previously,” Koulizos said.
He said the struggle in accessing credit could be one of the reasons why the number of investors has fallen dramatically in recent years.
Investor’s long-term focus
The study also found that property investors are now more focused on the long-term merits of real estate. Around three in four said worries about a price fall would not cause them to put their investment plans on the back burner.
The majority of investors claimed that the current environment makes it ideal to invest in residential property.
“Long-term capital growth beat out cash flow – both long- and short-term – as the most important aspect when choosing an investment,” Koulizos said.
The study also said that the motivation for would-be investors is not to “become rich” but to provide a better life for themselves and their family.
Gerv Tacadena, Your Investment Property, 4 October 2019