Beware the hype-driven Buyers Agent

APRA likely to make things tighter, not looser.

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One of the storms brewing for the past couple of years is the explosion of new-to-industry, hype-driven, return-spruiking buyer agents that have flooded all social media.

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The success of this fear-enticing marketing has sparked a large cohort of investors, sometimes in the hundreds, moving into a few particular areas, as the "cult" of similar buyer agents all buy in the exact location.

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Since investors typically purchase at similar price points, usually under $650,000, and these are tiny markets, they can be easily taken over entirely by investors with sharp price rises, creating FOMO and paper "potential" profits.

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On top of this, many who are not qualified to provide advice are perpetuating unlimited buying in trusts, SMSFs and companies.

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APRA, together with ASIC and RBA, have been watching this, and the noise around them taking action is increasing. We saw similar actions taken during the mid-2010s boom to slow down investors, such as limits, monitoring, and rate changes.

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As you can see below, in the latest Cotality Monthly, Investor lending is way above average. While this is great for creating rental accommodation, it is not in areas where other investors are also selling at some of the higher rates we have seen. In time, this will create a glut of new rental accommodation, likely speculative on short-term frames, rather than stable long-term rental stock.

In that vein, while APRA could reduce the servicing buffer as rates are heading low, with this higher risk building, APRA would want to slow down investor lending rather than encourage more.

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Watch this space, but the warnings are growing for ASIC and APRA to step in.