Getting a read on the changing investor landscape

Amid economic uncertainty, Australia’s property market is adapting as investors, lenders and brokers recalibrate strategies to seize opportunities in an evolving investment climate

IN A climate of uncertainty, the property investment landscape is undergoing significant shifts, driven by a complex interplay of economic factors and policy changes. As the market adapts to new realities and anticipated trends, investors, lenders and brokers are all recalibrating their strategies to capitalise on emerging opportunities. The property investment sector has demonstrated remarkable resilience, with recent data showing a steady increase in new loan commitments by investors. This growth is occurring against a backdrop of supply constraints and increasing rental demand. “Greater numbers of investors are being attracted into the property market with a goal to create a blended portfolio. The numbers show significant growth, with the ABS reporting the value of loans to investors is up almost 30% year-on-year,” says Liberty’s chief distribution officer, David Smith.

The outlook for the property investment market over the next 12 months remains cautiously optimistic, albeit with expectations of continued volatility. Smith predicts: “Property investment will continue to be a cornerstone of the Australian real estate market. Whether it be single-property investors, professional investors, self-managed super funds or commercial investors, there will likely be strong and sustained rental demand and a broadly stable interest rate environment.” But diving into the details of where that demand will lie reveals interesting nuances. CommBank’s general manager for third party banking, Razia Khan, says the outlook for property investments is mixed depending on area.

This growth is occurring against a backdrop of supply constraints and increasing rental demand. “A lack of supply is driving large rental increases and, in turn, raising customer demand, which means there is a fantastic opportunity for brokers to create ongoing relationships with investor clients,” says Smith. The current market conditions present both opportunities and challenges for investors, for whom strategic planning is key. “While there are numerous opportunities for investors, there are also several key considerations, including understanding the market, financial planning, property selection, property management and exit strategies,” says Wright. Thompson adds to this perspective, highlighting the favourable conditions for property investors: “Limited housing supply and high auction clearance rates have created an imbalance between supply and demand,” he says. “This, coupled with low vacancy rates, has led to higher rental yields and strong capital growth, making residential housing attractive for investors.”

Sep 23

Steady rise in new loans to investors

“With interest rates expected to stay high by recent standards, there is a growing likelihood that more affordable markets will attract increased attention from investors who are seeking to spend less on properties that still deliver low vacancy rates and strong rental yields,” Khan says. “There could also be a demographic shift, such as population growth, which could affect demand patterns, while the supply of new housing infrastructure will impact property values. Technological advancements and shifts in remote work preferences may alter location desirability.” For commercial property, the investment patterns are also expected to deviate from the norm. Belinda Wright, head of partnerships and distribution at Thinktank, says, “We anticipate several drivers affecting the different commercial property sectors, primarily increasing migration and tightening monetary policy. Persistent increased migration will likely boost demand for property. Where certain property types are in short supply, we can expect continued price increases.”

Recent data from the Australian Bureau of Statistics reveals a steady increase in new loan commitments by investors, with the trend rising from $9.32 billion in September 2023 to $11.02 billion in June 2024.

At CommBank, we’re focused on giving our brokers more confidence in CommBank and delivering an exceptional experience for them and their customers. We are doing this by being reliable, transparent, accessible and adaptable. Our strategy has been designed based on broker feedback and focuses on how we can improve the experience and build a strong and more sustainable third party banking channel. If you’re not already accredited with CommBank, now is a great time to join us as we’ve simplified our accreditation process. Head to www.commbank.com.au/home-loans/broker-accreditation.html to find out more. If you’re already accredited with CommBank, check out our 24/7 training hub – it’s all part of our commitment to giving you more confidence to build your business and deliver an exceptional homebuying experience to customers.

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ING changed the way Australians bank 25 years ago by launching the country’s first branchless bank. ING now offers Australians home loans, transactional banking, superannuation, credit cards, personal lending, insurance and wholesale banking services. ING is: Australia’s most recommended bank according to RFI Global’s Consumer Atlas Survey, December 2023–May 2024 (n = 30,792) when compared to customers of the 10 largest banks operating in Australia Canstar’s Bank of the Year since 2020, recognised for outstanding value across home loans, savings, credit cards, personal loans and customer satisfaction (Canstar 2024)

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Thompson adds to this perspective, highlighting the favourable conditions for property investors: “Limited housing supply and high auction clearance rates have created an imbalance between supply and demand,” he says. “This, coupled with low vacancy rates, has led to higher rental yields and strong capital growth, making residential housing attractive for investors.”

As a leading Australian non-bank lender, Liberty offers innovative solutions to support customers with greater choice. Over the past 26 years, this free-thinking approach to loan solutions has seen more than 850,000 customers get financial across a wide range of home, car, personal and business loans, as well as SMSF lending and insurance products. Liberty remains the only non-bank lender with an investment-grade credit rating offering custom and prime solutions to help more people get financial.

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This upward trend in investor activity is supported by various factors, including strong capital gains and the increased borrowing capacity of some investors. “Strong capital gains in recent years have supported market growth, leading some investors to cash out, while others have leveraged their equity and borrowing power to seize new opportunities,” says George Thompson, head of mortgages at ING Australia. The attractiveness of investing in property is further underscored by its long-standing popularity among Australians, and the scale of the market. “Property investment has always been a top choice for Australians looking to build wealth. With the value of the Australian property market reported to be worth $10.7 trillion, even more investors are looking to add bricks and mortar to their portfolio to earn rental income and benefit from capital growth,” says Adam Brown, executive for broker distribution at NAB.

This regional variation presents opportunities for investors to diversify their portfolios and potentially benefit from stronger growth in certain areas. When rate cuts eventually come, savvy investors are likely to move quickly. “Looking ahead, the Reserve Bank of Australia hasn’t ruled out the possibility of future cuts to the official cash rate, which could further stimulate investor interest,” says Khan. Such evolving market conditions create both challenges and opportunities for property investors. Lenders are adapting their offerings with a focus on creating flexible and tailored solutions to support this borrower segment.

“Whether it be single-property investors, professional investors, self-managed super funds or commercial investors, there will likely be strong and sustained rental demand and a broadly stable interest rate environment”

David Smith, Liberty

Adam Brown

NAB

David Smith

Liberty

George Thompson

ING

Razia Khan

CommBank

Industry experts

Razia Khan has been at CommBank for 15 years and held numerous leadership positions prior to her current role as general manager third party banking. Khan was general manager, acquisition and retention, in the homebuying business, leading improved customer experience outcomes through technology, digital, marketing and frontline support. She was also general manager in the Direct Lending division. Khan has a passion for the third party banking industry and is dedicated to enhancing the experience of brokers and their customers by offering best-in-class technology, strong relationships and transparency. A member of CommBank’s Inclusion and Diversity council for over four years, Khan is passionate about bringing more women into the industry and advocating for their success.

CommBank

Razia Khan

George Thompson heads up the Mortgages team at ING. He joined the team earlier this year when ING combined its home loans business to incorporate third party distribution. Thompson has been at ING since 2016, and during his tenure he has led teams in the Everyday Banking and, more recently, the Consumer Lending and Wealth businesses. Prior to that, he held senior product and strategy roles at Westpac and at Lloyds Banking Group in London. Thompson says, “Investing in the broker channel is crucial for our business and, importantly, customers. ING is committed to creating great home loan products that help more Aussies realise their homeownership ambition.”

ING

George Thompson

David Smith was appointed as Liberty’s chief distribution officer in January 2024. Strategy driven with a customer-first ethos, Smith is responsible for the broader distribution platforms of the Liberty Financial Group, including its business partner relationships. He brings a wealth of knowledge and expertise, having spent over 20 years in the financial services sector. Smith holds a Bachelor of Business (Hons) from Brunel University London and a Postgraduate Diploma of Marketing from the UK Chartered Institute of Marketing.

Liberty

David Smith

Adam Brown is the executive for broker distribution at NAB, with responsibility for national leadership of the NAB and Advantedge third party businesses. He has been at NAB for over 15 years with more than 10 of those spent working in and across the broker industry. His experience in financial services spans operations, risk, technology and sales/distribution, with several senior roles leading teams across these disciplines. Having led the national Advantedge business from 2019, he moved into an expanded role to lead the combined NAB and white label business in 2023.

NAB

Adam Brown

NAB

David Smith

Liberty

George Thompson

ING

Razia Khan

CommBank

Industry experts

CommBank

Razia Khan

ING

George Thompson

Liberty

David Smith

NAB

Adam Brown

Short-term volatility, long-term potential

Market dynamics and economic factors

Published 26 Aug 2024

Adam Brown is the executive for broker distribution at NAB, with responsibility for national leadership of the NAB and Advantedge third party businesses. He has been at NAB for over 15 years, with more than 10 of those spent working in and across the broker industry. His experience in financial services spans operations, risk, technology and sales/distribution, including several senior roles leading teams across these disciplines. Having led the national Advantedge business from 2019, he moved into an expanded role to lead the combined NAB and white label business in 2023.

NAB

Adam Brown

Liberty

David Smith

ING

George Thompson

Razia Khan has been at CommBank for 15 years and held numerous leadership positions prior to her current role as general manager third party banking. Khan was general manager, acquisition and retention in the homebuying business, leading improved customer experience outcomes through technology, digital, marketing and frontline support. She was also general manager in the Direct Lending division. Khan has a passion for the third party banking industry and is dedicated to enhancing the experience of brokers and their customers by offering best-in-class technology, strong relationships and transparency. A member of CommBank’s Inclusion and Diversity council for over four years, Khan is passionate about bringing more women into the industry and advocating for their success.

CommBank

Razia Khan

David Smith

Liberty

George Thompson

ING

Razia Khan

CommBank

Industry experts

Belinda Wright

Thinktank

Adam Brown

NAB

Belinda Wright is head of partnerships and distribution at Thinktank. With over 20 years’ experience across various divisions of banking and financial services, she specialises in residential sales, credit and end-to-end home loan processing, with a focus on the third party broker channel experience. She also has experience in marketing, commercial and institutional banking. Prior to working at Thinktank, Wright held roles at Westpac Group, ANZ and RAMS.

Thinktank

Belinda Wright

“Property investors have a diverse range of needs, depending on their goals and situations. For example, they may want to use short-stay and holiday rentals as part of their income”

Adam Brown, NAB

“While there are numerous opportunities for investors, there are also several key considerations, including understanding the market, financial planning, property selection, property management and exit strategies”

Belinda Wright, Thinktank

“Strong capital gains in recent years have supported market growth, leading some investors to cash out, while others have leveraged their equity and borrowing power to seize new opportunities”

George Thompson, ING

“Technological advancements and shifts in remote work preferences may alter location desirability”

Razia Khan, CommBank

NAB Broker Distribution is dedicated to helping brokers deliver the best customer outcomes, supported by a national network of experienced BDMs and dedicated support through every stage of a customer’s home lending experience. As the Bank behind Brokers, we will continue to invest in the broker channel and uncover the next innovation to make things simpler and easier for our broker partners and customers.

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Thinktank is an independent non-bank financial institution specialising in the provision of commercial-property mortgage finance up to $8 million and residential-property mortgage finance up to $2 million in the Australian self-employed, PAYG and SME sectors. Since 2006, Thinktank has provided over $11 billion of commercial, residential and SMSF lending solutions, which have enabled thousands of borrowers to achieve their goals of acquisition, refinancing and equity release. Thinktank offers a range of lending solutions, which include Full Doc, Mid Doc (alternative income verification), Quick Doc, SMSF loans and private lending.

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Seasonally adjusted

Oct 23

Nov 23

Dec 23

Jan 24

Feb 24

Mar 24

Apr 24

May 24

Jun 24

$bn

value Of new loan commitments by investors

Trend

Source: ABS Lending indicators, June 2024

Capital cities

-5%

Monthly growth

Annual growth

Source: PropTrack Home Price Index, June 2024

Home price growth by greater capital cities, all dwellings

10%

15%

20%

25%

National

Adelaide

Brisbane

Darwin

Hobart

Melbourne

Perth

Sydney

Median value

$855,000

$787,000

$759,000

$840,000

$477,000

$671,000

$729,000

$713,000

$1,107,000

Adapting lending products and policies

The property investment landscape varies significantly across different regions of Australia. “Across the country, regions like Western Australia and Queensland are enjoying significant upwards momentum as relative affordability and the recent strong capital growth generates investor interest,” says Khan. “Tight rental markets across Australia, as evidenced by record-low or near record-low vacancy rates and strong rental price increases, are creating a favourable environment for investors who are seeking stable rental income and capital growth.”

Regional variations and market opportunities

To better serve property investors in these challenging times, financial institutions are adjusting their lending products and policies. “ING consistently offers competitive investment lending rates across all loan-to-value ratios, including borrowers who require mortgage insurance. This strategy ensures that our investment lending products remain attractive to a wide range of investors,” says Thompson. This approach demonstrates how lenders are adapting to market conditions while managing risk profiles. ING also plans to lift its profile and level of business deriving from property investors. Thompson says, “To better serve property investors in the current market, we’ve made recent changes to our key credit policy: we’ve updated our negative gearing calculation from 2% to the borrower’s actual interest rate and have reduced our rental expense floor to 20%; [we’ve also] increased the maximum LVR for investor purchases to 90%.” The competition from non-banks is robust in this area. Smith explains Liberty’s approach: “Across the spectrum, from first-timers to professionals, all property investors need options tailored to their individual circumstances. We know brokers must continuously innovate to support their business growth, which aligns strongly with our free-thinking approach."

Wright highlights the diverse range of lending opportunities available to Australian property investors. “Whether it’s residential, commercial or SMSF lending, Thinktank is poised to help brokers and customers capitalise on market opportunities with expanded offerings for investors who are wishing to purchase or refinance.” She notes the growing interest in SMSF loans, an area that non-banks have a monopoly on. “SMSF loans are gaining popularity, allowing individuals to use their superannuation to invest in property and build long-term wealth through leverage. SMSF property investments can offer significant tax benefits, including reduced tax rates on rental income and capital gains, providing a long-term growth strategy for retirement savings." The wide range of servicing options is also advantageous.

“Investors are often seeking flexible policies that suit non-standard employment and income,” says Brown. “NAB’s loan assessments consider a property investor’s total financial picture, which means we may be able to lend more than other lenders. Property investors have a diverse range of needs, depending on their goals and situations. For example, they may want to use short-stay and holiday rentals as part of their income.”

To support brokers in this endeavour, lenders are providing various tools and resources. CommBank is a case in point. “We have a range of tools available to support our brokers,” says Khan. “Your Loans, for example, is our post-settlement tool offering brokers a comprehensive view of their clients’ loans, including information on their loan type, interest rate, maturity date and any discounts applied.”

Role of brokers in the investment ecosystem

Mortgage brokers play a crucial role in connecting investors with suitable lending products. To effectively tap into the property investor market, brokers need to cultivate a deep understanding of the unique needs and objectives of this client segment. Khan advises: "For a broker looking to tap into the property investor market, understanding their clients’ needs is paramount. It’s imperative brokers educate themselves on their customers’ investment goals – both short- and long-term – as well as their risk appetite and financial situation." Smith echoes this sentiment and highlights the growing demand for broker support.

“Just like any customer profile, it’s important for brokers to understand the objectives and priorities of investors,” Smith says. “This includes whether their focus is on yield or capital growth and over what time frame. With rent growth also predicted to remain strong for some time, and recovering rental yields boosting investor confidence, broker support is likely to be in higher demand.” Getting into a new area can be daunting but is part of a job that demands continuous learning. “The most common challenges for brokers are developing knowledge in new areas and managing a broad portfolio of clients with complex and diverse needs,” says Wright. “Brokers can now readily overcome these obstacles by leveraging technology, engaging in continuous learning and seeking support from industry experts.”

Brown emphasises the importance of relationships in the broking business. He says, “Mortgage brokers looking to tap into the property investor market should focus on the strength of relationships and the critical role they play in guiding customers. With a significant percentage of new residential lending written by brokers, there's a clear opportunity to support investors in achieving their financial objectives.” Brokers can also expand their services by leveraging relationships. “By targeting investors, brokers can step into an advisory role, which can deepen their customer relationships and expand their referral opportunities,” Brown says. “Brokers can support property investors with ongoing portfolio reviews to help people identify the equity in their properties and, in turn, utilise this equity to expand their property portfolios. They can also work with local real estate agents to identify opportunities.”

market-leading experiences,” he says. “Using automation and simpler processes, we can provide same-day unconditional approval when brokers submit all the required documents. “Upwards of 25% of applications are now being processed through our new Simple Home Loans platform, where most applications achieve time-to-unconditional-approval in less than one day and many within hours.” NAB also makes it easier for some groups to become investors. Brown says, “NAB has special allowances for medicos and essential services workers, and in some cases professionals in these lines of work may not need to pay lenders mortgage insurance.” Looking ahead, the property investment market is expected to remain sensitive to the black box of RBA interest rate decisions. “Whilst the interest rate environment is unknown, low vacancy rates, limited supply and tax benefits offered to investors continue to make residential housing attractive,” says Thompson. Over the next three years and beyond, these elements will play a crucial role in shaping the market's future. As the property investment market navigates these turbulent waters, adaptability will be key. Investors and brokers must learn to navigate the uncertainty, finding opportunities and meaning in the present. Those who can align their strategies with emerging trends and leverage the support of knowledgeable professionals stand the best chance of success.

Unique product offerings

Lenders are differentiating themselves through innovative product offerings tailored to property investors. Highlighting Liberty’s approach, Smith says: “Liberty has a broad range of residential and commercial solutions to suit the needs of property investors. We know investors are often seeking flexible policies that suit non-standard employment and income, and this is an area where we can offer solutions that other lenders may not.” Thinktank has specific offerings for commercial property investors.

“Thinktank has commercial policy offerings up to $8 million and supports borrowers with a Lease Doc product for commercial properties which is not limited by WAULT [weighted average unexpired lease term] or WALE [weighted average lease expiry],” says Wright. “As long as the lease has at least two years remaining at the time of settlement, we can provide our customers with a committed loan term of 25 years with no annual reviews.” Brown highlights NAB’s focus on simplicity and digitalisation. “To better serve all our customers, including property investors, we’re focusing on being simple and digital so we can deliver

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