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Property investment changes on the horizon

27 Jun 14

The way in which property investment loans are granted could soon be about to change, especially as investors take up a growing share of the market.

This is according to RP Data's Research Director Tim Lawless, who revealed that the proportion of investors is now close to record highs.

Investor mortgage commitments registered at 39.4 per cent in April this year, but when refinancing is removed from the total, this increases to 47.8 per cent.

Mr Lawless said it's now in the hands of banking regulators to take whatever action is necessary to readdress the growing imbalance in the property market.

He went on to say that investors are now finding it more difficult to secure property, especially in state capitals where gains are high and yields continue to struggle.

RP Data analysis shows following the peak in property value growth, the proportion of total lending to investors continued to rise. During the current cycle, six-month annualised value growth increased in November last year to 14.3 per cent.

Investors accounted for 38.5 per cent of all lending during that period, but this has now risen to 39.4 per cent.

"Since values reached their recent trough in May 2012, home values increased by 16.1 per cent to April 2014 compared to a 59.2 per cent rise in the value of investment lending," Mr Lawless emphasised.

Those who have undertaken a property management course may have also seen a shift in the market over recent months, as RP Data revealed that gross rental yields have become compressed.

At present, yields stand at 4 per cent, which is even less than the low point of 4.3 per cent recorded in May 2012.

However, with high-grade unit construction in the pipeline, it's possible there will be a rise in new stock coming to the market in the months and years to come.