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November 08, 2017
Jenny Pham

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Investors keen, but starting out tougher for new players

Property Reporter


Jonathan Lee bought his first investment property in Wagga about six years ago on the advice of a friend.

On reflection, he says it perhaps wasn’t the best investment. “It hasn’t grown in price but it has good rental yield. I kind of keep it to remind me to make better decisions,” says Mr Lee, 32 and owner-manager of Mortgage Choice Williamstown.

He and his wife Foong-Yue Cheah now have five investment properties and have deposits on another three off the plan.

They’re not alone. The number of investors with large portfolios surged in the years before the banking regulator’s crackdown on investment lending. But despite the clamps, there are still investors wedded to real estate.

Investors who bought property before stricter bank rules are continuing to buy, but those starting to build a portfolio recently are finding it harder to get into the market because of the larger deposits required and the higher investor mortgage rates, buyer agents say.

A five-year housing bull run in the east coast capitals is showing signs of slowing, but prices remain high, making it a challenge for many prospective buyers to afford even one property.

The number of investors with five or more properties jumped 7.5 per cent between financial 2014 and 2015, compared with average growth of 4.5 per cent over the previous nine years, Reserve Bank figures show.

Since then, bank regulator APRA has cracked down, introducing a 10 per cent cap on growth in investor lending during the 2015 financial year and in March limiting growth in new interest-only lending to 30 per cent of all home loans.

Investors who bought properties before the clamps have seen the value of their portfolios rise as house prices have soared and are using the equity for more purchases, Cohen Handler managing director and co-founder Simon Cohen said. “Once they start with one, two or three they want to keep the portfolio going,” Mr Cohen told The Australian.

“Anyone on the flip side who’s trying to start out now, bank lending is tight and it’s making it harder because you have to have a chunky deposit.”

Property buyer managing director Rich Harvey said location was key, as investors with several properties in Sydney and Melbourne were finding it easier to buy more than an investor with five homes in a Queensland mining town.

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