If you ever wondered why property investment is so popular in Australia, aside from the tax benefits, it is surely found in the chart below from CoreLogic.
It shows total returns for investors, including both the median increase in property values as well as rental returns over the past five years.
There’s been some enormous returns, particularly in Sydney and Melbourne, Australia’s largest and most expensive property markets.
Unsurprisingly, these cities are also those that have been traditionally favoured by investors.
And who could blame them?
A nominal return of 97.1% in Sydney, and 63.8% in Melbourne — and that’s before any tax benefits.
It’s quite a handy return, particularly at a time when wages and household income growth have been weak.
“The strong value growth in Sydney and Melbourne over recent years has been a key driver of demand from the investment segment,” said Cameron Kusher, research analyst at CoreLogic.
And it appears that trend is continuing.
According to housing finance data released by the ABS on Thursday, the value of investor lending jumped by 4.6% to $12.416 billion in September, the largest monthly total since August last year.
It was also the sixth increase seen in the past eight months, with almost all of it from New South Wales and Victoria.
Auction clearance rate in Sydney and Melbourne, the capitals of those states, have also regularly topped 80% in recent months, a sharp turnaround on earlier this year when tighter restrictions from lenders — as a result of regulatory changes from APRA, Australia’s banking regulator — saw investor activity in the market slow sharply.
It now appears that this is reversing, and it’s little wonder given the returns since 2011.
Whether that trend continues given prior capital gains, and an influx of new high-density housing stock about to hit the market, is something that is likely being considered by many prospective investors right now.