Home News Strong house prices a problem for residential property investors

Strong house prices a problem for residential property investors

Font size :
The soaring house prices in recent years have also driven rental yields in both Sydney and Melbourne to record lows. And according to Moody's Investor Services, this can become a problem for investors, as "the net costs involved in servicing a housing investment have increased relative to household incomes, making investment properties less affordable."

This eventually increases the risk for Australian residential property investors and residential mortgage-backed securities. It has also increased the level of cash flow losses suffered by residential property investors over the past three years as it made investors dependent on house appreciation to cover their investment losses.

"Investors in Sydney houses require 39.6 per cent of net household income to service their investment properties, while Melbourne house investors require 26.5 per cent, both record highs," Moody's said. This leads to an increase in risks and default probability for residential property investors.

This is the reason why the Australian Prudential Regulation Authority (APRA) clamped down the growth of investment lending in 2015. The concentration of the Australian big four banks on housing loans was troubling the banking regulator.

"It is a significant issue of concern to us that close to two-thirds of [the big four banks'] balance sheets are exposed to property, mainly housing loans," said Charles Littrell, APRA's executive general manager of supervision and support.

According to Moody's, investment loans lent during the height of the lending boom in 2015 and 2015 are going to perform relatively poorly compared to those issued in other years. It might also mean that the performance of investment loans across the entire banking sector is bound to deteriorate in 2016 and 2017.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

New social housing aims to transform Ivanhoe Estate New social housing aims to transform Ivanhoe Estate

The sprawling redevelopment aims to boost the supply of affordable housing in Sydney Read more

A new suburb will be built in west Melbourne A new suburb will be built in west Melbourne Mount Atkinson will become home to more than 22,000 people over the next 15 years ... Read more

Surging house prices threaten liveability in Melbourne Surging house prices threaten liveability in Melbourne Analysts warn the city could become just as unaffordable as Sydney, if property trends continue ... Read more

More Aussies would benefit from regional hubs linked to cities More Aussies would benefit from regional hubs linked to cities Shorter commutes could spur higher home sales in regional towns, analysts say ... Read more

More mortgage news and articles

Sponsored Links

Friday, Aug 18, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords