Canberra investors spurred on by low interest rates and negative gearing changes

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Canberra investor activity is on the rise again, energised by lower interest rates and the recent prospect of a change to negative gearing.

The ABS reports that the value of residential lending to investors approved over June surged to $213.9m – an increase of 14.4 per cent over the month. The June increase followed a remarkable rise of 26.1 per cent over May, compared with the previous month.

The June total was the highest monthly result reported since the $224.1m recorded over June last year. It is also the third highest monthly total recorded by the local market.

Although the June result was at near-record levels, the value of residential lending approved in Canberra remains 17.1 per cent lower over the first half of this year compared with that recorded over the same period last year.

Concerns from the financial regulator over strong lending to investors a year ago resulted in higher mortgage interest rates imposed on that group, which predictably resulted in a sharp decline in lending over the second half of 2015.

Rate cuts in May and the prospect of a change to the negative gearing tax treatment for residential investment property, as proposed by the ALP during the recent federal election campaign, have resulted in a wave of investment activity in most state markets.

With another rate cut announced this month, rising house prices and changes to superannuation policies, increased residential investor momentum is likely to continue through the year.

The prospect is also rising that annual monthly growth rates over the second half of 2016 may clearly exceed the speed limits dictated by financial regulators.

Dr Andrew Wilson is Domain Group chief economist. Twitter: @DocAndrewWilson