High demand and low vacancy rates have created a challenging environment for renters, but it’s an opportune moment for property investors. With rising rental prices, stable rental yields, and declining property prices in many areas, the market seems ripe for investment. However, investors have not been capitalizing on these favourable conditions.
Data from the Australian Bureau of Statistics reveals that investor lending for housing in February decreased by 32.6% over the year, while overall housing lending declined by 30.9%. Although the housing shortage cannot be solely attributed to the absence of investors, their involvement could help alleviate the crisis. The primary obstacle for investors has been interest rates, which have led to reduced borrowing capacity and higher mortgage repayments, making property investment significantly more expensive than it was 18 months ago. Last year was a difficult period for investors, as residential prices fell, and investment property options were limited due to low property listings and scarce new homes for purchase.
Experts suggest that the current situation may be favourable for property investors due to low housing supply, high population growth, falling vacancy rates, and increasing rental prices in capital cities. A balanced market typically has a 3% vacancy rate, but capital cities reported only a 1.43% rate in March 2023, down 55% from March 2020 and 0.66% from March 2022. Advertised rental prices increased by 2% nationally in the first quarter of 2023, and these trends are expected to continue. Building more homes is a long-term solution, and a greater number of investors need to purchase those homes.
In Australia, investor lending for housing has declined by 32.6%, and overall housing lending has dropped by 30.9%. Despite this, experts are urging investors to enter the property market, considering the current rental crisis, increasing rents, and decreasing vacancy rates. Although there has been a recent lack of investment, some investors are beginning to re-enter the market. The PropTrack Home Price Index for April demonstrated a 0.14% increase in property prices across the country and a 0.20% increase in capital cities, signalling a rise in property demand and potential price gains. With anticipated population growth, the demand for rental accommodations is likely to grow, making it an ideal time for investors to enter the property market for long-term investment.
Experts believe that apartments are a more attractive option for investors due to their relative affordability and robust rental yields. While detached house prices surged during the pandemic, apartment prices experienced a slower growth rate, rendering them more appealing to investors. Additionally, falling prices in Sydney and Melbourne have enhanced rental yields, making these areas more enticing to prospective investors. Analytics indicate that apartment markets in major east coast cities are currently the only housing markets that are not overvalued.
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