Q. Investor lending has been rising rapidly recently – how does it compare to owner-occupier growth
Eliza Owen (EO): If you look at the past year of loans secured, the growth in the value of lending to the investor segment was 30 per cent compared to 13 per cent in the owner-occupier segment over the year to June. On top of that, not only have you got faster growth in the investment space, but what that means is that investors are reaching a higher concentration of the mortgage market.
By value alone, it was at 38 per cent in June, and that’s the highest concentration we’ve seen since April 2017. So that is the first time in about eight years that investors have played such a significant role in new lending.
Q. Do you think now is a good time for brokers to be writing property investment loans?
Adam Brown (AB): Property investment has always been a top choice for Australians looking to build wealth. With the value of the Australian property market reaching $11 trillion, even more investors are looking to add bricks and mortar to their portfolios.
This is an opportunity to earn rental income and benefit from capital gains. Property prices are not slowing down; they continue to increase. It does differ by state, but they do continue to increase. If you’re not writing investment loans and helping customers to write investor loans, then you’re probably missing out on a great opportunity.
Q. What is driving heightened investor activity?
EO: Investor activity has historically been driven by long stretches of capital growth that are very appealing for investors. A lot of investors deploy a negative gearing strategy, which helps explain why some of our biggest investment markets, like Sydney and Melbourne, have historically had compressed rental yields. People are willing to buy even if the rent income isn’t going to cover the mortgage payment. In Sydney, you’ve had 80 per cent growth in the past 10 years alongside a relatively low yield averaging 3 per cent.
Like most borrowers, investors are navigating affordability challenges and reduced borrowing capacity. In some ways, we’re seeing a pivot from traditional investment markets like Sydney and Melbourne to areas such as Queensland and Western Australia.
In May, there was about $11 billion in housing finance for investment property purchases and 21 per cent of that was for property purchases in Queensland, about on par with Victoria, which is very unusual.
Western Australia is the other big winner, where in December 2019, the state received 4.1 per cent of investment finance. That’s now up to 11 per cent.
Q. Why are investor loans a good string for brokers to have in their bow?
AB: Most brokerages are looking to diversify revenue streams and deepen customer relationships and helping customers with their property investment loans allows brokers to do that. If you’re writing both owner-occupier and investor loans, it deepens that customer relationship and the amount you know about that customer, and it gives you the opportunity to increase your referrals.
Q. How does NAB help brokers work with property investors?
AB: NAB supports brokers and property investors by providing easy access to equity information through their internet banking platforms, helping investors kick-start their property investment journey.
We’ve invested a lot in our internet banking platforms and we are emphasising education and awareness regarding equity information to help customers make informed decisions. For brokers, quick access to this information means they can swiftly assist their customers.
We’ve also started to digitise and automate our new platform, focusing on simple and digital processes to expedite decision making, often within hours or days. This rapid turnaround is crucial for investors eager to secure a property and that’s something we are very proud of.
Post unconditional approval, NAB assigns a dedicated case manager to assist brokers and customers to ensure timely settlement and we’re hearing positive feedback from brokers on this.
Q. Where are the future opportunities for property investors?
EO: Values have come up a lot since the pandemic, creating opportunities. We’re seeing high growth and interest in more affordable market pockets, key in an environment with increasing affordability constraints and cost-of-living pressures.
It means that the cheaper pockets in capital cities and regions are generally the fastest-growing. For example, high interest in Perth is centered in the south-east pocket.
Regional centres like Illawarra, Lake Macquarie, and Shoalhaven in NSW will attract interest from those priced out of Sydney.
Q. How can brokers help investors realise these opportunities?
AB: Brokers have the opportunity to proactively engage with customers about their long-term aspirations, emphasising the importance of understanding equity and the potential for future property investments.
It’s equally vital for brokers to check in with customers about how they’re managing current pressures, such as cost of living and higher interest rates. Customers with existing investment properties might need tailored help and support, such as repayment pauses or reduced repayments.
Brokers are encouraged to reach out early to offer support and guidance.
