According to the Australian Finance Group (AFG), new home loans are up 6% since last year to $505,000, spurred on by low interest rates and rising property prices. Some industry experts have grown sceptical as to how long the rising prices can last but in the past three months alone, Sydney house prices have risen 5.4%.
According to the Sydney Morning Herald, owner-occupier home loans in NSW have increased by 50% in the past decade. With interest rates at 2.5% and with room to go lower, many investors and owner-occupiers are taking advantage of borrowing power and equity in their homes to purchase an additional property or upsize.
NAB (ASX: NAB) executive general manager Vicki Carter said, "At NAB, we've already seen an increase in customers coming to see us about a home loan and we expect to see this continue". With more people applying for loans, customers could use the help of a professional mortgage broker or company such as Mortgage Choice (ASX: MOC) to compare products and access the best loans on offer from all banks, not only the big four.
It's not surprising that investors are taking on more property since they are getting cheaper loans and growing rental rates throughout much of the country. Australian Property Monitors senior economist Andrew Wilson said there are "real prospects of short-term capital growth" and an "under performance of alternative investments".
Foolish takeaway
Despite the rapid increase in house prices in Sydney since February, the Australian stock market has still outperformed it, even more so when dividend yields, franking credits, agent fees and management costs are considered.
Source: Google Finance
Even with property yields around a spectacular 5%, on $500,000, that's $25,000 per year. This Fool thinks there are better opportunities available in stocks that pay more than 5% in dividends and have a great chance of moving higher in the next year.
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Motley Fool contributor Owen Raszkiewicz owns shares in Mortgage Choice.
