Property investors move back into the market

Signs that investors are moving back into the property market may be one of the first initial signs of an economic recovery, according to a leading property executive.

Data from the Australian Bureau of Statistics shows the total value of fixed loans for investment properties grew by a seasonally adjusted 8.9% from March to April 2009.

David Airey, president of the Real Estate Institute of Australia, says the news may be an early sign of market recovery.

“They’re creeping back into the market. Property is a very slow reflection of the stock market and we are seeing tentative steps by property investors, and I think this is yield-driven,” he says.

“By that I mean, prices have dropped in the last 18 months and interest rates are at 50-year lows, yet rents have increased. Yields have increased to borrowing rates, and investors wanting to have a balanced portfolio have moved into property.”

“This is a very good first sign of recovery.”

Airey says the news is encouraging and that while the size and type of investors cannot be measured in detail, he suspects investors are private entities which have previously exited the market and are now slowly entering again.

RP Data research analyst Cameron Kusher says that “conditions are ripe for investors” and agrees with Airey that the data could be an initial sign of recovery.

“The main reason we haven’t seen this activity before is because of the competition with first-home buyers. Of course they may be getting in before tax-time to try and get a few deductions, but yields and rents are strong, and we’re getting good value growth.”

“There’s obviously a lot of positive data over the last month or so. It is one sign of a recovery, but obviously unemployment has gone up today, so while there are positive signs there are negative signs. On a month-to-month basis data can be volatile, so people’s confidence comes down to what data comes out.”

Yesterday’s ABS figures also showed early improvement in other areas, with the value of all dwellings rising by a seasonally adjusted 3.6%, while the value of owner occupied housing jumped 1.9%.

But Airey says a full recovery in the market will still occur next year, and that the majority of the market will follow Sydney’s lead.

“The signs that need to appear over a long period would be stability in interest rates, and possibly a small increase in interest rates which would signal a recovery in the economy, and then increasing activity among property investors as we’ve seen. Finally, an upsurge in sales over $1 million in capital cities, particularly in Sydney and Perth.”