Investors take note

Property investor activity in the Australian housing market has been falling since early 2015, after macro-prudential policies were implemented in Australian mortgage lending.  Apart from a brief ‘bounce’ in 2016, investor participation has been consistently trending lower.

The decline of the property investor has been brought about by multiple factors. These include:

  • temporary policies implemented between 2014 and 2019, which limited lending products favoured by investors; 
     
  • mortgage rate premiums for investor loans;
     
  • less appetite for high LVR and interest only lending from the banking sector;
     
  • less certainty around prospects for capital gains;
     
  • high levels of housing construction which have softened rental returns; and, 
     
  • the recent global pandemic, which has created a particular negative demand shock to the rental market, thereby further inhibiting returns.


But can we expect investor activity to keep declining? When comparing investor activity at the state level with CoreLogic rental data, there are clear differences between markets that may appeal to investors, versus those where the retreat could last longer. 

QLD. Investor participation in the QLD dwelling market shifted significantly lower over 2017, and again with the onset of the COVID-19 pandemic. Inner Brisbane in particular has seen high levels of unit development, which has placed downward pressure on rents over time. Since the onset of Stage 2 pandemic restrictions in March, Inner Brisbane unit rents have declined a further -4.8%.

Despite a long period of high supply and subdued investor participation, gross rental yields across the state are far higher than NSW and VIC, largely due to relatively low dwelling values. A typical dwelling value at September was around $505,000 across Brisbane, and $388,000 across regional QLD. Gross rental yields across the state were 4.8% in September, down from 5.0% a year ago. 

With this information in mind we should be seeing investors return to the market during 2021 and 2022 as we emerge from the Covid pandemic we will see business confidence take leaps and bounds to pre-covid levels and beyond.

It looks like Australia will emerge from this global pandemic much stronger and be once again an economy envied by the world.

Source: https://www.corelogic.com.au/news/retreat-property-investors-which-state-has-been-most-impacted?utm_medium=email&utm_source=newsletter&utm_campaign=20201019_propertypulse&utm_content=pp_blog%20

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