An analysis of the latest housing finance data released by the Australian
Bureau of Statistics (ABS) reveals that Australia’s property market has moved
through its peak growth phase after registering strong growth for two years.
RP Data research director Tim Lawless said that the value of investment
finance commitments was at a record high, increasing by 2.3 per cent in April, and
29.8 per cent year-on-year. Investors committed to $11 billion worth of housing
finance over the month, accounting for 39.4 per cent of all housing finance or
47.8 per cent excluding refinances. However, Mr Lawless believes banking sector
regulators may show signs of discomfort with the level of housing market
investment given that the proportion of lending to investors is at near-to
According to Mr Lawless, investors may now find it harder to secure a
property with changes to solid investment fundamentals, particularly in cities
where capital gains have been significant and yields are low.
Over the current growth phase, six-month annualised value growth peaked
in November 2013 at 14.3 per cent with investors accounting for 38.5 per cent
of all lending; this has since risen to 39.4 per cent. Mr Lawless notes that
investment lending outpaced growth in capital city home values. The growth in
values peaked but there was a compression of gross rental yields.
At the low point in values at May 2012, gross rental yields across the
combined capital cities were recorded at 4.3 per cent; currently yields are 4.0
Sydney and Melbourne are seeing the highest levels of investment
activity among all capital cities with Sydney providing gross rental yields at
4.0 per cent and Melbourne at 3.6 per cent, down from 4.5 per cent and 3.8 per
cent respectively in May 2012. Current investment activity in both cities is
heavily focussed on the inner city unit market with approvals for new units at
With a high volume of investment grade unit stock in the pipeline, it
will be interesting to see if these approvals convert to construction and the
potential impact of a large supply on values, rents and vacancy rates.