Are investors good for the property market?

It’s become a hot topic. Regulators were concerned enough to contact Australia’s big banks last December, urging them to watch the growth in investor loans.

They were acting on concerns that investor-driven demand was reaching a worrying peak in Australia, potentially inflating prices and putting the nation at risk of a housing downturn.

Yesterday, the Reserve Bank released figures showing that three of the four big banks had investor loan growth greater than 10 percent over the last year. The RBA and the Australian Prudential Regulation Authority are right to keep an eye on the potential effects.

Should we be concerned about the effects of investors on the property market?

It must be remembered that investors must be a part of any healthy property market.

There are good reasons.

Firstly, let’s forget about an increasing worry that foreign investors are fuelling the property price increase. There has not been sufficient evidence that overseas money is playing a heavy role.

But, if needed, foreign investment can sometimes raise capital for property projects in much faster time than local investment.

Many experts believe local buyers are behind the increased investment activity. And we know from our experience that some investors are simply first home buyers looking for property in affordable locations. They may not want to live in these areas – preferring to rent elsewhere – but they are more than happy to become part of the housing market.

It’s the only home they own.

There are some people who own multiple properties, often attracted by the goal of creating wealth that is not decimated by the taxman. Their astuteness can pay rewards.

And, sometimes you have people who never want to buy a property.

We often assume that everyone wants to have their own place. But some people prefer to invest in shares or to invest in a business to create wealth.

They need somewhere to live, and they’re happy to rent.

Let’s not forget one important point – if we don’t have investors, we don’t have rental properties.

The RBA and APRA are right to keep an eye on investor-driven demand – and they seem to be following it closely.

But we should always remember that a level of investment activity is good for the property market.

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