Throughout the year, we have heard countless stories about how investors are selling their properties, which is exacerbating the crisis in the rental market by reducing supply.
For example, PropTrack Director of Economic Research, Cameron Kusher, this week warned that “investors continue to exit the market, which is keeping the overall stock of rental properties low”.
Sydney-based real estate agent and BresicWhitney chief executive, Thomas McGlynn, likewise warned last month that large numbers of Sydney landlords are selling-up:
“We’re definitely still seeing a large increase in the number of investors looking to sell compared to a year ago, which has doubled in our books”.
“I think there are a lot of investors who haven’t come to market yet, but many are thinking about selling and calling us about it”.
“Generally, when you see a large number of inquiries, you’re going to see more investment properties come to market, which we’re expecting later this year or early 2024”.
Geoff White, branch manager of Barry Plant Yarra’s Edge, claimed similar was happening in Melbourne:
“A lot of landlords are finding it tough to hold on to their investment properties at the moment because of high mortgage repayments and the additional compliance costs due to the recent state policies”.
“At the same time, there’s hardly any capital growth, in some cases, values have gone backwards, so there’s very little incentive for landlords to hold on to their assets”.
Meanwhile, Martin North from Digital Finance Analytics explained that “the math is pretty obvious” as to why investors are selling, noting that investors are “faced with significantly higher interest charges and other costs to the point that the proportion of investors making cash flow positive returns has dropped to an all-time low”.
While there are undoubtedly significant volumes of investors selling their holdings, there are now also large numbers entering the market.
Mortgage commitment data released on Thursday by the ABS showed that new housing lending rose by 0.6% in September, driven by lending to investors, up by 2.0%.
Moreover, in annual terms, investor lending is now higher than levels a year ago (+2.6% year-on-year), versus a 4.7% decline in owner-occupier lending:
Australian dwelling prices have increased by 8.9% since their February trough, with trend investor lending increasing by 13% over the same period.
This rebound in investor lending has come at the expense of first-home buyers, whose share of new mortgage lending has fallen sharply while investor lending has risen:
Clearly, there is a lot of churn in the investor mortgage market, with exiting investors largely being replaced by newcomers.
Source: CoreLogic
The outlook for property investors is also largely positive given that the capital city rental vacancy rate is at an all-time low 0.9% and should tighten further amid record population growth and below-average construction activity.
