Property News

Residential investment declines in September

05 October 2006

There was a dramatic fall in investment in residential property during September according to the latest figures from mortgage broker AFG.

The AFG Mortgage Index shows that during September sales of residential investment mortgages in New South Wales fell to their lowest level since April 2004, with only 22% of all mortgages sold to investors, down from 29% in August 2006.

This compares to boom state Western Australia, where 45.6% of all new mortgages were sold to property investors.

In Queensland, investment levels are back to where they were in March 2005 at 24.1%, down from 30.9% in August.

Together with a slight cooling-off of property investment in Western Australia (down from a peak of 48%) and South Australia, the national average has seen the proportion of property investors across Australia fall to 27.1% - the lowest level since December 2005.

"While we should always be cautious about putting too much emphasis on a single month’s data, the fact is that it’s years since we’ve seen such a sharp, month-on-month decline in residential property investment," said Malcolm Watkins, Executive Director of AFG.

"While WA is still fired up, investors are a lot less confident about New South Wales and Queensland, and the last interest rate rise has probably made them even more reluctant. What we’re seeing instead is increasing investment in commercial property as investors seek alternative asset classes."

Overall, AFG reported a downturn in sales of 8.8% during September, though this follows the same trend last year when sales fell by 8.5% between August and September. Victoria was the only state to buck the downward national trend, reporting not only a slight rise in sales, but a surprise and significant jag in the average mortgage size from $279k to $294k, and residential investment up slightly to 22.2% from 21.0% in August.

Overall, the number of new property buyers looking to lock in interest rates declined slightly to 20.2% in September, from its high point of 22.6% the month before. The average national mortgage size was also more or less steady at $307,422.