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First home buyers did an excellent job of boosting the housing market, but as the grants are phased out many say investors are already stepping up to the plate to take their place.

Australians have always had a love affair with property.

While the dream of owning your own home isn’t limited to Aussies, the desire to accumulate more than one property is much more pronounced Down Under.

Recent surveys of 2,000 mortgagors in the UK and Australia (published in Retail Finance Intelligence’s report “The Lucky Country?”) found a greater percentage of UK property owners were solely owner-occupiers.

Of survey respondents, 31% of Australians owned an investment property, compared to just 16% in the UK. Only 2% of UK respondents only owned an investment property, compared to 6% of Australian respondents.

The data is a reflection of how highly Australians value investment property. And while tax laws which allow negative gearing on investment properties have always made property an attractive investment option, that sentiment has only increased through the economic downturn.

The June 2009 RFI report found 61% of Australians said they felt now was a good time to buy investment property. This feeling of optimism was reinforced by the next survey question which asked respondents if they are planning to invest in the next 12 months, to which 13% responded positively.

According to the survey, key motivators for investment in Australia are capital growth, for retirement, tax purposes, low interest rates, income stream purposes, strong sentiment that the property market has bottomed out and poor performance of the share market.

These findings have been backed up by Your Investment Property magazine. According to its research, three in five respondents feel now is the best time to buy an investment property, while three in seven plan to buy another property now. Almost all (98%) of those surveyed consider property a safe investment, while one in three investors are depending on property for retirement.

Brokers are coming up with similar findings. AFG recently found 30% of all new mortgages were arranged for investors in July, up from 24.5% in March – indicating many are taking over the property market as first buyers phase out.

AFG general manager of sales and operations Mark Hewitt told SmartCompany that the return of investors was sparked by a falling stock market.

"The return of investors has been talked about in meetings for six months, but only in the last two months have we seen it transpire. A lot of people pulled cash out of the stock market when it crashed and have been sitting on the sidelines waiting to get into that market."

"As the property market starts to pick up, and there's still demand for rental properties, a lot of the fear around about whether there was going to be a housing crash has subsided, as it's fairly clear that's not going to occur."

On the ground 
Brandi Financial Services’ general manager Sam La, who is based in Melbourne, says he derives about 80% of his business from property investors.

While he hasn’t yet noticed a significant surge in the number of investors returning to the market, he says that softened property prices over the last 12 months have kept smart investors trawling through the weekly classifieds to find good deals.

“If you do the right homework, and have a keen eye, there are great purchase opportunities out there,” he says.

He predicts the potential “investor-boom” will last for three to five years.

“Melbourne’s population growth figures and subsequent drive for continued increase in demand for housing is still outstripping supply. The Victorian State Government is on a spending spree in relation to infrastructure growth over the next few years which increases the attractiveness and viability of new satellite suburbs.”

National Mortgages’ Mandy Kilgore, who operates out of Sydney, says she noticed a slow-down from investors when the first home buyer grants kicked in.

“But now that that’s quieted down, the investors are starting to trickle back in again.”

While there’s always been a demand from serial investors, mums and dads are starting to dip their toes into the water.

“They’re getting into it for the first time,” Kilgore says. “They’ve realized that their super has had a hit and that they should be looking at investment properties as well, as opposed to just relying on their superannuation.”

While the Reserve Bank of Australia has suppressed interest rates for several months (at the time of writing the cash rate was 3.0%), Kilgore says future movements should not affect the investor market greatly.

“With investors, the rent is covering the mortgage anyway, so it’s not as huge a drama. And we’re hoping it might only raise a couple percent over the next few years. If we’re only going back to the levels we were when we were stable then 7% is not particularly high for investment.”

One of Canberra’s top brokers, Gerard Tiffen of Tiffen and Co, agrees that most are not worried about interest rates going up too much.

“It’s not stopping anybody,” he says.

Investors have always made up about 50-60% of Tiffen’s business. He says he’s definitely noticed an increase in the number of investors coming through his door over the last three months,

“I think the increases have occurred because interest rates are low, money is cheap and accountants are saying you should do this.”

According to Tiffen, reductions to superannuation contributions have many asking their accountants what they should do with their spare cash. 

“I’m finding accountants are saying I have a new strategy for you, get an investment property.”

Economists say the return of investors is a good indication of growing confidence in the market.

The Australian Property Monitors quarterly report showed low interest rates and record low vacancy rates are making it particularly attractive at the moment.