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This is a Momentum Media production. Nerd alert! Property nerds. The home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends. Property nerds are back.
We're back in for another episode. It's Arjun Paliwal here, your co-host and founder of InvestorKit Buyers Agency. And I'm here with Lee. Hi, yeah, I'm Leigh Paliwal and I am the director of Hills Finance out here in Bella Vista, Sydney. Awesome.
And so we've got some exciting news, a few new releases of this episode and the usual finance starter update as well to keep you posted on all things finance. But we'll be jumping very deep into what I call investing relativity and also our new white paper we've released here at InvestorKit, which has loads of jam-packed info. So Lee, I might kick it off to you. What's happening on the finance front? You've seen obviously the new ABS data.
It'd be great to hear from you on what is coming out. So yes, October 2021 ABS data has come out and obviously going straight to the finance numbers. So overall, there has been a fall of 2. 5% in lending, but it has remained 32. 2% higher compared to one year ago.
So obviously it's on a rise overall, which is fantastic. Just recently has fallen. Now in terms of owner-occupied housing, that's fallen by 4. 1%. And so this is actually the fifth month consecutive fall.
However, it is remaining higher at 15. 1% a year ago and 42. 5% higher than pre-COVID levels back in February 2020. So that's good. With finance falling, I think the last few months, I mean, what's that fall been in terms of owner-occupiers versus investors?
Was it owner-occupiers falling only or was it investors falling as well on the finance? Because that's a couple of months of the dips, right? It was owner-occupier at the 4. 1%. Investors back in action.
Not going to say thanks to InvestorKit alone, but I mean... Investors investing with InvestorKit. So that's actually the 12th consecutive month of a rise in a row. So more and more investors month on month. Look, I think it's needed.
I mean, the key thing here is that another thing to note is rental markets have been super stressed. Vacancy rates are so low. Investor activity, it should be rising, in my opinion, to come and relieve some pressure. But that pressure is not really easing much. It's still picking up and getting even stronger on the rental front.
But yeah, thanks for sharing the thoughts on the investor and owner-occupier split. What else is happening on that front from the finance? Well, so if you've been tuning in, we do our monthly podcast. Last couple of months, we've talked about, obviously, the fixed rates that continue to rise. So initially, you know, CBA, you know, started the trend.
And that was back on October 15. They moved their fixed rate terms by 10 basis points. Now, since then, they went again massively after that was called by the RBA. And they added a full 50 basis points to all of their fixed rates. Then you had Westpac, NAB and ANZ, which continue, I should say, follow the trend.
They moved it twice since then. NAB was the only lender until just a couple of days ago that had fixed rates in the ones. They've now added 50 basis points to their lowest fixed rate. So there we go. All fixed rates for owner-occupiers are now in your mid, early mid twos plus.
I guess the key thing to point out is, and for those who didn't check out the last episode, we actually jumped in and we're talking about how investing relativity and how to think about interest rates in greater detail. So we'll definitely go through more about the impact of interest rates on various markets and how it's not a one size fits all for sure. But the key thing as well, Lee, is if I'm correct, fixed rates is one part of the equation. Variable rates are still standing pretty steady and if not even down for some banks, aren't they? There has been drops in some lenders for the variable rate or just remains as is.
So, yeah. So, yeah, I think in still in summary, I would say the rates haven't gone up. I'd say variable rates are still an option. Fixed rates can change. They're more the bank's outlooks on what's ahead.
And for those fixed rates that are changing and people are choosing fixed rates, the thing that I would say there, Lee, is that when we talk about that last episode, we spoke about relativity. I think we raised an example on Adelaide. And when we use Adelaide, we talked about rents inflating as well by 8. 8 percent over the last 12 months. And we took a case study where half a percent of rate rise against the median house price in Adelaide, say 80 percent loan.
In comparison to the 8. 8 percent in rents rising, the variance was about $10 a week. So you can see, you know, with rates rising, it's a result, obviously, across of the thoughtful higher rates, inflationary pressures and so forth. But at the same time, rents are a line item in the inflation column as we do see that increase. That does then mean that it's all relative.
Not ever going to be a perfect picture, but just one of those things. Yeah. So simply the fixed rates for two, three, four years is what the bank thinks the rates will be at that point down the track where they foresee it's going to be in two to three, four years. And so, Lee, the white paper, what's happening over there? We've got some exciting news there coming up soon.
But before we jump into that one, I know you and I offline were talking about some exciting news on what's happening in the broker space. Now, big news there, right? How's that going along? So most obviously everyone in the broker space is aware of this, but just so everyone is aware, the broker channel has hit a brand new milestone of writing 66. 9 percent of all new residential loans in the mortgage lending market.
What that means is, you know, obviously you can go to a bank or a broker. Sixty six point nine percent of loans now are written by a broker, which is fantastic for all those brokers. Now we can say we're not biased when we say our brokers are better, because obviously I know you run a brokerage at Hills Finance, but the numbers are there. People, people are wanting to go to brokers. And I guess the key thing I think of there on that one is definitely portfolio lending versus transaction lending.
Well, it goes back to, yeah, why does someone choose a bank over a broker? And generally speaking, your mortgage broker will be an experienced lender, whether they've started in their journey in mortgage broking or in the banks and they've journeyed out. And yeah, exactly. So they understand how to structure finances, whether it's use of multiple lenders to get the best out of your portfolio. Yeah.
Clients are starting to catch on that. There is probably an advantage of having access to an expert like that who has access to multiple lines of lending. Yeah. So simply the fixed rates for two, three, four years is what the bank thinks the rates will be at that point down the track where they foresee it's going to be in two to three, four years. And so, Lee, the white paper, what's happening over there?
We've got some exciting news there coming up soon. But before we jump into that one, I know you and I offline were talking about some exciting news on what's happening in the broker space. Now, big news there, right? How's that going along? So most obviously everyone in the broker space is aware of this, but just so everyone is aware, the broker channel has hit a brand new milestone of writing 66.
9 percent of all new residential loans in the mortgage lending market. What that means is, you know, obviously you can go to a bank or a broker. Sixty six point nine percent of loans now are written by a broker, which is fantastic for all those brokers. Now we can say we're not biased when we say our brokers are better, because obviously I know you run a brokerage at Hills Finance, but the numbers are there. People, people are wanting to go to brokers.
And I guess the key thing I think of there on that one is definitely portfolio lending versus transaction lending. Well, it goes back to, yeah, why does someone choose a bank over a broker? And generally speaking, your mortgage broker will be an experienced lender, whether they've started in their journey in mortgage broking or in the banks and they've journeyed out. And yeah, exactly. So they understand how to structure finances, whether it's use of multiple lenders to get the best out of your portfolio.
Yeah. Clients are starting to catch on that. There is probably an advantage of having access to an expert like that who has access to multiple lines of lending. Yeah. So simply the fixed rates for two, three, four years is what the bank thinks the rates will be at that point down the track where they foresee it's going to be in two to three, four years.
And so, Lee, the white paper, what's happening over there? We've got some exciting news there coming up soon. But before we jump into that one, I know you and I offline were talking about some exciting news on what's happening in the broker space. Now, big news there, right? How's that going along?
So most obviously everyone in the broker space is aware of this, but just so everyone is aware, the broker channel has hit a brand new milestone of writing 66. 9 percent of all And locals may not be too pressured by these price changes due to income and servicing that income capability. Whereas if a valued location is substantially overvalued, how long and how frequent can growth keep occurring at these overvalued levels? Doesn't mean it does not happen and it cannot grow. It can grow and I've got many examples to share that, but it's just something to keep in mind.
And this is where you talk about real affordability because affordability is based on servicing. So that's how investors can use it. But in terms of the things that we've done further along on this report is that we've actually also overlaid some of this data because overvalue and undervalue, you know, you want to overlay some of the data. And so what we did is we put market pressure to analyze how hot or cold is the market right now. And then we also talked about its last 10 year growth to talk about its recent cycle positioning.
And lastly, where we think it's headed. So that's how we made this analysis a lot more helpful than just is it under or overvalued? Because some cities have been overvalued for like 15 years and yet they've continued growing. So there's no clear correlation. Hence why we wanted to look at it from is it overvalued or undervalued?
And by how much? What's the pressure that's occurring there? And what's the recent 10 year growth look like? And what are we thinking ahead for the short term? So it's a very broad analysis that covered many factors.
Okay. And so what would the shortcomings of using this methodology be? Yeah, great question, Lee. So there are shortcomings for sure in any methodology and property where you try and, you know, put everything together to make it one data point and use data to tell everything perfectly. At the end of the day, it's bricks and mortars and households are different.
Prices are different. Suburbs are different. Jobs are different. There's just too many variables for us to go, hmm, this data says why? And as a result, your city cannot grow.
So that's the first thing to understand about property data. But I would say the shortcomings in this methodology is anytime you're using a single methodology to rate a whole city, that's the first shortcoming. If we take that same mean income of Sydney and when we looked at Sydney's data, the Sydney's data was a very interesting one. The greater Sydney data was seen to be 22% overvalued in the current markets based on our analysis. Now, there's the shortcoming of this methodology is displayed in the fact that can you really use a mean income to display all of Sydney's affordability reasons?
So there's no point in having those regions move from affordable to non-affordable just to get back to fair value for the sake of it. That's never going to happen. I think they're always going to be having an attraction point of an affordability piece in comparison to other cities. So to some extent, we could say that some of these regions will always remain undervalued because people are seeking affordability. But yes, there are some that are just substantially undervalued in this case.
So yeah, that's basically it from this particular analysis and report and can't wait for feedback, thoughts, anything like that. And it's out now. And if you'd like to grab a copy of it, you can jump on to investigate. com. au.
We did our best here on this podcast to dissect some of the pros of it, the cons of it, what to expect. And again, this is free and that's our job here at The Property Nerds. We want to pass on free insights, dissect the property data that's out there, share finance trends and leave it with you all to use them on your journey as you see fit. Amazing. Property Nerds out.
Property Nerds out. Game over.
