The Australian property market has seen a rise in both the number of investors selling and buying properties recently, as new CoreLogic research reveals intriguing shifts in investor behavior across states. Here’s a closer look at why some investors are selling while others are seizing the opportunity to buy, despite high interest rates and an ever-tightening market.
More Buying Than Selling
According to CoreLogic, the volume of new loans to investors has outpaced investor listings across Australia. In October alone, 18,400 new investor loans were recorded compared to 13,000 listings, indicating a strong interest in property investment even in a high-interest rate environment. The Australian Bureau of Statistics (ABS) data also shows that new loans to investors rose by 18.8% over the 12 months to September, underscoring a resilient investor demand despite economic pressures.
Changing Investor Profiles
The market appears to be attracting a new type of investor—those less leveraged than traditional investors. Reserve Bank of Australia data suggests that these new investors have a more conservative debt profile, allowing them to weather interest rate hikes better than those highly indebted. Additionally, “rentvesting” (where buyers purchase investment properties to enter the market without yet buying a home) is becoming more popular, though it remains a small portion of the market.
Regional Trends: NSW vs. Victoria
New South Wales has aligned with national trends, showing an increase in both property listings and new investor loans. NSW saw a 20% rise in new investor loans, while investor listings rose 7% above the five-year average. In contrast, Victoria is showing a slight shift, with more investors selling than in other states due to a mix of weak capital growth, increased land tax, and tighter rental market regulations, resulting in subdued investor sentiment in Melbourne’s middle-ring suburbs.
Rising High Loan-to-Value Ratios
The rising cost of living and high property prices are pushing more home buyers and investors towards high loan-to-value ratios (LVRs). Recent data shows that 9.2% of new loans for owner-occupiers and 3.22% for investors had LVRs of 90% or higher. This trend signals that buyers are prioritizing immediate market entry over saving larger deposits, hoping to capitalize on expected future capital gains despite the risk of being cash flow negative in the short term.
Investor Incentives and High Hopes
Low deposit incentives, such as the First Home Guarantee Scheme, allow eligible buyers to enter the market with as little as a 5% deposit, appealing to first-time investors eager to secure an asset. Financial experts suggest that many buyers anticipate property prices to climb further, and some are also banking on potential interest rate cuts. This optimism drives investor activity, though experts caution that market risks remain, especially if prices stabilize or fall.
Final Thoughts
In summary, the current market dynamics reveal a dual movement in Australia’s property market. High interest rates, regulatory changes, and rising costs of living may be prompting some investors to exit, but for many others, the lure of future capital gains and strategic investments outweighs the risks. The market is robust, with strong buyer demand, particularly in states like NSW, making it an interesting time for seasoned and new investors alike to reassess their strategies.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 15 November 2024
