RMBL, an experienced pair of hands for investors
RMBL is an experienced pair of hands for investors and borrowers as the market navigates a shift out of an aggressive monetary policy cycle.
The landscape of property investment in Australia has been marked by a whirlwind of changes, with one of the most significant being the surge in interest rates.
It is understandable consumers perceive current interest rates to be high given it was only in April 2022 when the cash rate was at 0.1%, and the velocity of rate rises has been fast over the past year and a half. But historical data shows at the present level of 4.35%, the cash rate is actually sitting at just above a 34 year average of 3.85%.
This means borrowing costs are currently at a relatively normal level, which should support the property market in the medium term. However, while interest rates are a crucial factor, they are just one piece of the complex puzzle that makes up the property investment landscape.
Household wealth grew 2.3% at the end of the September 2023 quarter mostly driven by strength in the housing market. Median residential house prices grew by 8.1% nationally over the year to December 2023. “This indicates there is already a recovery taking place in real estate, where prices were impacted by the number and magnitude of cash rate rises over the past 18 months,” says Erfurth.
The relative performance of regional versus metropolitan areas is a good example. Having enjoyed a boom during the pandemic, median regional house prices rose by 4.4% in the year to December 2023, while annual residential property prices across capital cities grew by 9.3% in the same period.
“This indicates while people are still pursuing a sea change or tree change and buying in regional areas, many are coming back into metropolitan spaces for work, school and to access all the amenities cities offer,” says Erfurth.
Residential real estate markets are also supported by demand for housing from migrants and students. Australian Bureau of Statistics’ (ABS) data shows migrant arrivals increased 73% to 737,000 people in FY23 . While in October 2023 alone, 38,790 international students arrived in Australia, an increase of 10,100 students compared to October 2022.
“Migrant and student demand for housing, especially on city fringes, will only continue to rise as the number of migrants coming to Australia balloons in coming years. This will drive the development pipeline in these areas for many years,” says Erfurth.
Identifying good opportunities
Given the varied factors influencing property markets, it is imperative for investors to fully understand what they are investing in, particularly when it comes to an asset’s implied risk.
In the mortgage-backed debt arena, especially for commercial property, RMBL exclusively focuses on first mortgage lending. Moreover, our lending practices adhere strictly to a maximum LVR of 66.66 per cent. Consequently, RMBL’s arrears levels are negligible, underscoring effectiveness of our risk management and lending protocols.
While other non-bank lenders may appear to provide a similar opportunity to those offered through our business, often the risks to which investors are exposed through their investments are substantially higher than the risks to which they are exposed through RMBL. Other companies may offer significantly higher leveraged loans with second or third mortgages over properties and the LVR they are prepared to accept may be substantially higher.
“This means investors are accepting considerably more risk, although at face value the returns they receive may be higher,” he adds.
So, it is essential for investors to undertake significant due diligence to appreciate the potential risks and rewards to which they are exposed, especially in a market where signs of distress are rising in certain property subsectors.
Overall, now’s the time to consolidate gains and take a prudent view of the future. At RMBL, our focus is on supporting our existing borrowers and maintaining a watching brief as new trends and themes emerge as the interest rate cycle settles.
Overall, now’s the time to consolidate gains and take a prudent view of the future. At RMBL, our focus is on supporting our existing borrowers and maintaining a watching brief as new trends and themes emerge as the interest rate cycle settles.