property investors to drive growth

Investors to drive pace of property growth


Florence Chong From: The Australian January 06, 2010

PROPERTY investors, who took out a third of all residential mortgages in December, are expected to replace first-home buyers as drivers of growth in 2010, according to leading mortgage broker, Australian Finance Group.

The mortgage broking group, which wrote 10 per cent of all residential mortgages in Australia, arranged $650 million in loans for property investors in that month.

The group's general manager sales and operations, Mark Hewitt, told The Australian yesterday that Australia-wide it was fair to assume that investors were responsible for $6.5 billion of mortgages approved in December.

Mr Hewitt said December was actually a "quiet" month compared with the previous three months. "We arranged a total of $3bn worth of mortgages in September."

Last month, AFG, which worked with 30 banks to access mortgages, arranged mortgages totalling $1.9bn. "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.


"We saw a 20 per cent fall last month, compared with an 8 per cent fall in (the corresponding month in) 2008."

But he expected activities to pick up in February, with investors leading the way.

"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."

He said the volume of mortgages arranged last year rose 10 to 12 per cent.

He forecast growth of 4 to 5 per cent for this year.

He said investors now represented about 34 per cent of all mortgages arranged by AGF -- up for 25 per cent a year ago.

"I expect the figure to continue to rise to around 38 per cent, and possibly 40 per cent, which would be a record level.

"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."

Mr Hewitt said investors looked to property as a "safe bet" to offset the volatility in the sharemarket and general uncertainties surrounding other forms of investment.

"Property investors, able to take a long-term view, are hoping to ride a new upward cycle in property values, but right now ordinary families are sitting on their hands rather than upgrading," he said.

Mr Hewitt said two out of every five mortgages arranged in NSW were for investment properties.