Investors return as cash flow improves

For two years, Samara Metri watched from the sidelines as she poured money into her business rather than growing her property portfolio. But the rapidly growing market was getting harder to ignore, so the Sydney-based buyer’s agent jumped back in.
“I bought three houses across Adelaide, Brisbane and Sydney in the last two months and I have just exchanged a contract on another in Melbourne.”
​“I am also negotiating on a property in Perth, which should come through in the next few weeks.”

Ms Metri is the founder of Buyers Club, which encourages people to invest in property to build wealth, but even she had been on a hiatus from the market until recently. “With money being so cheap at the moment, cash flow is excellent, and you’re getting solid capital gains too. There is no way I can stay out of the market.”

Expats are getting into the fray, lured by rising rents and surging values. Singapore-based head of foreign exchange trading at TD Securities, Weeli Goh, has recently settled four house-and-land packages in Brisbane’s bayside suburb Cleveland for $700,000 a piece. “If I think about the return, you’re already getting about 6 per cent on cash before capital gains, so even if we just get an average of 3 per cent each year, that’s an extra 15 per cent return on our cash. I think you would struggle to achieve that consistently in other assets,” Mr Goh said.

​Data from the Australian Bureau of Statistics shows investor activity has been ramping up steadily since bottoming out in May last year. Lending to investors rose by 70 per cent between May and February, lifting the market share to 24.2 per cent from a record low of 23.1 per cent. “This was the first month since July 2018 that investor finance rose against a fall in owner-occupier finance,” said Eliza Owen, CoreLogic head of research for Australia. “Prior to this, investor participation had remained low proportionally because oowner-occupier finance rose faster.”

​The lure of positive cash flow

​SQM Research managing director Louis Christopher said the exceptional yields being achieved across capital cities and regional areas were hard to overlook. “The bulk of capital cities, as well as across regional Australia, are now offering cash flow positive properties, which is something I’ve never seen before in my career in terms of these opportunities,” he said.

​“You can even get properties that earn more than the mortgage cost in Sydney and Melbourne, which is unheard of, because interest rates are so low.” CoreLogic data shows the median rental yield in Sydney was 2.7 per cent and 2.9 per cent in Melbourne as at the end of March - both higher than the current average 2-year fixed rate loan of around 2.6 per cent. But while the investor numbers are growing at a healthy pace, they remain well below the decade average of 35.4 per cent of the lending market and substantially lower than the 45.9 per cent peak reached in April 2015.

CoreLogic data shows the median rental yield in Sydney was 2.7 per cent and 2.9 per cent in Melbourne as at the end of March - both higher than the current average 2-year fixed rate loan of around 2.6 per cent. But while the investor numbers are growing at a healthy pace, they remain well below the decade average of 35.4 per cent of the lending market and substantially lower than the 45.9 per cent peak reached in April 2015.

​Read the full article at ​https://www.afr.com/property/residential/investors-return-as-cashflow-improves-20210414-p57ja1

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