Fresh PropTrack data has revealed a significant surge in investment property sales in Melbourne and Sydney during the December quarter.
In Sydney, investment property sales accounted for 35.2% of home sales, up from 28.3% in the previous year and 28.9% in 2021, while Melbourne mirrored this trend with investor sales rising to 35.2% from 26.9% a year ago and 27.9 in the same period in 2021.
Despite the rise in sales, Paul Ryan (pictured above), PropTrack senior economist, noted an overall increase in investor activity.
“There has been more investor activity in the market, both selling and buying. On net, we've seen more investors entering the market than investors leaving the market,” Ryan said.
This is attributed to rental property shortages and the lure of rising yields, with national rents climbing more than 11% over the past year.
“These rental shortages aren’t going to be alleviated in the short term, so I think investors can see that although interest rates are high now, interest rates might reduce in the future, and rents are likely to keep growing strongly.”
Ryan said there is always a segment of investors exiting the market, primarily due to reaching retirement age and the cessation of negative gearing benefits as their incomes decrease.
“If you’re a landlord that’s held the property for a while and you've seen interest rates increase, quite good capital growth, and don't expect maybe as much capital growth in the near term, that might make it a good time for you to liquidate your holdings,” he said.
Ryan acknowledged that elevated mortgage costs could prompt some investors to sell, yet he described the overall conditions for investors as “quite positive,” with no immediate expectations of further rate hikes.
“The outlook for both rents and interest rates are positive for investors,” he said. “Most of the discussion is just about the timing and quantity of interest rate cuts, potentially later in the year.”
Investor sales as a percentage of total property sales increased in every Australian capital city over the past year, with the exception of Adelaide.
In Brisbane, the share of properties sold to investors in the December quarter rose to 32%, up from 29.9% in 2022. Similarly, in Perth, Hobart, and Darwin, the proportion of investor sales saw a slight increase during the same period.
Adelaide diverged from this national trend, with investor sales comprising 27.8% of the total in the December quarter of 2023, a decrease from 29% in 2022 and 31.5% in 2021.
Amidst this backdrop, Adelaide has emerged as the most robust capital city market post-pandemic, with property values soaring nearly 60% since March 2020 and listing numbers significantly below the ten-year average, pushing vacancy rates under 1%.
PropTrack anticipates this strength to persist, forecasting a property price growth of 4% to 7% in Adelaide for 2024.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
