NSW driving surge in new investment lending

by Miklos Bolza24 Jan 2017
New investment lending in NSW has accounted for more than half of all new lending nationwide for 42 out of the past 48 months, according to a new analysis from property intelligence firm CoreLogic.
Using figures from the Australian Bureau of Statistics (ABS) released yesterday (23 January), CoreLogic found that resurgent investor demand has largely been driven by NSW and Victoria.
Both Sydney and Melbourne have consistently recorded the strongest value growth of all capital cities over the past five years, head of research Cameron Kusher said.
NSW accounted for 51.3% of all total investment lending as of November 2016 with Victoria taking a further 24.5%. This means three quarters of all mortgage lending to investors occurs in these two states, Kusher said.
However, he warned that higher mortgage values in these states may end up distorting the numbers somewhat.
“It is important to consider that more expensive markets (such as NSW) will tend to result in borrowers taking out larger mortgages whereas borrowers in more affordable markets will generally take out smaller mortgages.”
Examining new lending (excluding refinancing), Kusher said that NSW accounted for 56.7% of the total value as of November 2016.
“Looking over the past four years, the value of new lending to investors in New South Wales has been greater than new owner occupier lending for 42 of the past 48 months,” Kusher said.
While Victoria had previously seen slightly more than 50% of new lending to investors, this dropped to 45.0% in November.
Across the remaining states and territories, the proportion of new lending to investors as of November is as follows. All figures are based on state or territory data:
  • Queensland (39.7%)
  • South Australia (37.1%)
  • Western Australia (31.0%)
  • Tasmania (26.1%)
  • Northern Territory (40.3%)
  • Australian Capital Territory (38.7%)
“It’s clear that demand for mortgages from the investor segment is picking up, particularly in New South Wales and Victoria, which are proxies for Sydney and Melbourne respectively,” Kusher said.
While the low cost of borrowing and increased housing equity were attractive for investment in these two markets, the long-term value growth phase along with historically low rental yields meant there were potential risks for investors to consider, he added.
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