️ Highlights:
1. Investors have been exiting the property market, leading to a decrease in the overall stock of rental properties and worsening the rental crisis.
2. Sydney and Melbourne have seen a significant increase in the number of landlords selling their properties.
3. The lack of capital growth and high mortgage repayments have made it difficult for landlords to hold on to their investment properties.
4. However, recent reports suggest that investors are now returning to the property market, driven by rising prices and rents, as well as the belief that interest rates have peaked.
5. As a result, investor mortgage growth is outpacing growth in owner-occupier mortgages, and first home buyers are being crowded out of the market. In 2024, investors are expected to lead the demand for housing.
A Shift in Investment Dynamics Amidst Rising Prices and Rents
Throughout 2023, the Australian housing market witnessed a notable trend: a significant number of investors were selling their properties, contributing to the exacerbation of the rental crisis by reducing supply. However, recent developments indicate a reversal of this trend, with investors increasingly returning to the market.
Initial Investor Exodus and Its Impact
Earlier in the year, reports from industry experts like Cameron Kusher, Director of Economic Research at PropTrack, and Thomas McGlynn, CEO of Sydney-based real estate agency BresicWhitney, highlighted a substantial increase in investors looking to sell their properties. This trend was evident in both Sydney and Melbourne, with landlords facing challenges due to high mortgage repayments, additional compliance costs, and minimal capital growth. The Ray White real estate report in September echoed this sentiment, noting a nationwide exit of investors from the market.
The Turning Tide: Investors Re-Entering the Market
Contrary to the earlier trend, recent reports suggest a growing influx of investors into Australia’s property market. James Kirby of The Australian observes that after a period of hesitation, investors are now actively participating in the market, encouraged by the stabilization of interest rates and the continuous rise in property prices and rents. The Commonwealth Bank of Australia’s economics team notes that demand from investors has started to surpass that of owner-occupiers during the current upswing.
Investor Mortgage Growth Outpacing Owner-Occupier Mortgages
Data reveals that investor mortgage growth is significantly outpacing the growth in owner-occupier mortgages. This shift has led to a decrease in the share of mortgages held by first-home buyers, who are being increasingly crowded out by investor activity.
2024 Outlook: Investors Leading Housing Demand
With mortgage rates likely having peaked and the rental market booming, 2024 is poised to see a continued increase in investor-led demand for housing. This resurgence of investor interest is reshaping the dynamics of Australia’s housing market, potentially leading to further growth in property values and rental yields.
Conclusion
The Australian housing market is experiencing a significant shift, with investors re-engaging and driving demand. This change is pivotal in understanding the market’s trajectory and its implications for property values, rental markets, and first-home buyers. As the market evolves, monitoring these trends will be crucial for stakeholders in the real estate sector.