While first-time homebuyers responding to government incentives accounted for much of the activity in Australia’s real estate market during 2009, 2010 could be a record year for investment volume. Attracted by the security that property offers over the long-term, those investors will be keeping a sharp eye on interest rates. For more on this, see the following article from Property Wire.
Residential property prices in Australia increased by 11.3% after their modest 3.8% peak-to-trough falls in 2008 and the market is likely to be dominated by real estate investors in 2010.
The latest published information from RP Data and Riskmark International found that the best performing city was Darwin with prices up 17.9% while Adelaide was the worst, recording just a 5.7% increase.
Mortgage experts expect 2010 will be a good year for the industry but with a change in emphasis in terms of who is buying. Property investors are expected to replace first time buyers as the main purchasers in coming months.
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‘We don’t expect first home buyers to be as active as in 2009 when they were driven by various government grants to buy their homes. The first home buyer market peaked in 2009,’ said Mark Hewitt, general manager sales and operations, at leading mortgage broker, Australian Finance Group.
He said that the volume of mortgages arranged last year rose 10 to 12% and he is forecasting growth of 4 to 5% in 2010. He revealed that investors now represented about 34% of all mortgages arranged by AGF, up from 25% a year ago.
As an example, he said, two out of every five mortgages arranged in NSW were for investment properties. ‘I expect the figure to continue to rise to around 38% and possibly 40%, which would be a record level,’ he added.
Hewitt said investors looked to property as a ‘safe bet’ to offset the volatility in the share market and general uncertainties surrounding other forms of investment. ‘Investors are returning to property investment. They have been coming back since the middle of last year to take advantage of a tight rental market,’ he explained.
The main concern for property investors in 2010 is likely to be interest rates. AGF saw a 20% fall in the number of loans arranged in December. Although this is usually a slower month the figures fell just 8% in December 2008.
‘We’ve been warning for months that three rate rises in a row was overkill for a vulnerable market, and the latest figures confirm our fears,’ commented Hewitt. The result is that property investors, able to take a long term view, are hoping to ride a new upward cycle in property values, he said. ‘But right now ordinary families are sitting on their hands rather than upgrading,’ he added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.