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Despite the exit of residential property investors over the past year, a strong appetite for investment opportunities persists and first-time investors continue to play a crucial role.
While the Property Investment Professionals of Australia (PIPA) latest annual survey revealed that 12.1 per cent of respondents reported selling at least one investment property in the past year, warning of the repercussions on the rental market, the managing director at Empower Wealth Advisory Ben Kingsley had not seen “any rush of sales”.
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PIPA highlighted concerns about dwindling supply in an already tight rental market, as the volume of stock available for rent remains low and demand for rentals is broadly strong.
However, Mr Kingsley anticipates that more supply might enter the market if interest rates remain elevated as property owners grapple with increased holding costs.
In addition, he noted a gradual increase in property listings and sales amid rising interest rates.
“The short-term outlook is mixed, with affordable markets across the country more likely to perform better in the short term until interest rates and the APRA ease off on their buffer rates.
“Brokers should always take their clients’ long-term interests into consideration when helping them.
“Brokers who play the long game in looking after their customers are going to the ones that hang around in our industry the longest, as their customers will be far more loyal to them.”
The annual Property Investor Sentiment Survey, conducted in August 2023 and based on responses from 1,724 property investors, showed that 55 per cent of investors are still on the lookout for new investment opportunities. However, this was down from 58 per cent the previous year and 62 per cent in 2021.
Furthermore, only 26 per cent of investors purchased a property in the past 12 months, down from 37 per cent in the prior year.
Looking ahead, the survey noted that 31 per cent of respondents expressed interest in purchasing an investment property within the next six to 12 months, a decline from 37 per cent in the previous survey.
For example, the report highlighted a shift in property ownership dynamics, with 24 per cent of properties sold by exiting investors finding new owners within the investor community, marking a notable decline from the 33 per cent reported in the previous year.
Overwhelmingly, those rental homes were bought by existing homeowners (43.1 per cent) or first-home buyers (30.3 per cent), PIPA’s Chair, Nicola McDougall said.
She explained several factors have contributed to investors exiting the market, including evolving tenancy legislation, concerns over rental freezes, and the possibility of higher taxes.
According to the survey, this trend is particularly pronounced in Melbourne (24.8 per cent), Brisbane (23.3 per cent), and regional Queensland (16.5 per cent).
Queensland and Victoria have recently enacted stronger protections for renters, including safeguards against retaliatory actions and the implementation of minimum housing standards.
In addition, Victoria’s planned land tax changes, set to take effect on January 1, 2024, also played a role in prompting investors to reconsider their investments. These changes will reduce the tax-free threshold from $300,000 to $50,000.
First-time investors have a keen eye
However, the survey also revealed a silver lining, with first-time investors making their presence felt.
Approximately 18 per cent of all respondents who purchased property in the past year were first-time investors, a slight increase from the previous year.
“This figure, while down from the 29 per cent reported in 2020, indicates a continuing interest in property investment among newcomers,” Ms McDougall said.
Of these first-time purchasers, 93 per cent acquired existing properties, a slight drop from 96 per cent in the previous year, while 6.4 per cent opted for new or off-the-plan properties, a notable increase from 2 per cent the previous year.
Among these first-time investors, about 29 per cent identified as “rentvestors”, a figure consistent with the previous year’s findings.
Additionally, 42 per cent of all investors expressed an interest in the rentvesting approach.
[Related: Investor comeback expected as rate forecasts ease]
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