Investors are expected to replace first home buyers as the dominant driver of property growth in 2010, the Australian Finance Group (AFG) Mortgage Index has found.
According to the Index, two out of every five mortgages arranged in NSW in December were for investment properties.
More than $180 million was invested in properties across NSW during December 2009, 17 per cent more than the $153 million invested in properties during December 2008.
But while NSW performed strongly, the overall mortgage market declined for the third consecutive month in December.
In September AFG arranged $2.9 billion of mortgage finance nationally, but this figure fell to a low of $1.9 billion in December.
“We have been warning for months that three rate rises in a row was overkill for a vulnerable market, and the latest figures confirm our fears,” AFG general manager sales and operations Mark Hewitt said.
“Yes, December is traditionally a slower month than November, but what we saw last month was a 20 per cent fall compared to an 8 per cent fall in 2008. When you combine the effects of increasing, out of cycle lending rates and tighter credit criteria with an end to the first home boost, what you get is a combination of factors that constrains confidence.”
According to Mr Hewitt, property investors will hopefully ride a new upward cycle in property values, while ordinary families will be forced to sit on their hands rather than upgrade.
The AFG Mortgage Index also showed fixed rate mortgages fell to an all time low of only 2 per cent of the total product mix, with 77 per cent of buyers opting for variable rate mortgages, and the balance choosing equity or introductory mortgages.
The 2 per cent figure is the lowest ever recorded by AFG, which saw fixed rate products average 22 per cent of the product mix in 2007, 12 per cent in 2008 and 4.36 per cent in 2009.