It is for these reasons that Australian property investors are returning.
Here are some key points to remember
The prospect of strong capital gains is luring investors back into the market in addition to strong rental price growth.
Australia’s rental crisis is driven by a chronic shortage of rental properties and a rapidly growing population.
Both buyers and sellers continue to benefit from the current market conditions.
PropTrack reports that the number of properties hitting the market has increased, and auction volumes and sales have consistently exceeded last year’s.
As well as strong rental price growth, which maintains healthy rental yields, investors are attracted by the prospect of strong capital gains.
Australia’s rental crisis is driven by a chronic shortage of rental properties and a rapidly growing population.
As a result of this situation, investors have returned to the market.
This is the third consecutive month that new lending, excluding refinancing, has increased.
New lending has followed improved housing market conditions since 2023, with prices recovering from declines in 2022.”
A buyer’s and seller’s sense of confidence
The current market conditions remain positive for both buyers and sellers.
The number of properties hitting the market has increased, and auction volumes have consistently been higher than last year, according to PropTrack’s data.
There has also been a substantial increase in sales.
New lending grew by 4.8% in April, the highest monthly increase since January 2022, and by 24.6% year-over-year, the highest since December 2021.
New lending grew by 5.6% for investors and 4.3% for owner-occupiers, with investor activity increasing by 36%.
Prices and yields of rental properties
In spite of recent slowdowns in rental price growth, rents have still increased faster than property prices.
According to PropTrack’s latest Rental Report, gross rental yields have reached their highest level in almost four years.
Further comments were made by Ms Creagh:
The strong growth in rents and increasing property prices have attracted investors, particularly in Queensland, South Australia, and Western Australia, where new lending to investors has reached record levels.”
The first half of 2024 has seen strong growth in property prices in these states.”
Rental markets are tight
Australia’s tightest capital city rental markets can be found in Queensland, South Australia, and Western Australia.
In the past year, Perth prices have increased by 20.58%, while Adelaide and Brisbane prices have increased by 14.49% and 13.69%, respectively.
Vacancy rates remain around 1% in Brisbane, Adelaide, and Perth, making it difficult for many to find available rentals.
This means properties are unlikely to sit untenanted for long, given the high demand.
Investments on the interstate
More investors are looking to buy interstate according to realestate.com.au.
Among interstate buyers, South Australia accounted for 29% of enquiries.
With 27% and 25% of enquiries, respectively, Queensland and Western Australia follow.
Due to the chronic housing shortage, investors are expected to increase their investment activity.
In the future
While population growth remains strong, Ms Creagh predicts a worsening shortage of homes due to low building activity.
Property prices are likely to rise regardless of interest rates, according to many investors.
As investor activity increases, long-term rentals will increase, helping to ease rental market constraints and the chronic shortage of rental supply that has led to record-high rental prices.
With government incentives, first-time buyers are still pursuing their property buying goals despite deteriorating affordability.
In April, first-home buyer loans rose in both number (+3.0%) and value (+3.4%)
Ongoing home price rises are likely incentivizing many to overcome affordability challenges and transact with the expectation of further price growth.
The tough rental market situation has likely encouraged some renters to purchase their own homes sooner, adding to demand.
Ms Creagh further said:
“The strength in new lending activity is expected to continue as the stage three tax cuts came into effect on July 1, supporting real incomes and boosting borrowing capacities.
Home prices are also expected to lift further, although the pace of growth may slow during the seasonally quieter winter period, particularly with the increasing probability of another rate rise this year.”
