The number of active property investors fell 6.3% in June, according to the latest Australian Bureau of Statistics lending indicators.
The sharp drop in active investors looking to buy property means their market share is now sitting below its long-term average of 34.9%, after only hitting the historical benchmark in March this year, according to a national buyers’ agent.
Atlas Property Group director Lachlan Vidler (pictured above left) said the latest data to June 2022 showed investors now comprised 33.8% of mortgage demand by value, with a recent peak of 35.75% recorded in April and a record low of just 22.9% during 2020.
“It’s clear that the rapid escalation in interest rates buffeted investor lending as well as confidence in May and June,” Vidler said. “We have to recognise that since June, interest rates have ramped up a further two times in successive months, so investor activity is even more subdued than this data-set reflects.”
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Vidler said that investor activity had been below historical averages for several years – apart from in March and April this year, which was one of the predominant reasons for the critical rental undersupply currently occurring.
“Back in 2017, targeted lending restrictions were put in place that prevented investors from accessing lending, which resulted in the supply of rental properties starting to contract,” he said. “Investor confidence only started to improve about a year ago, but now that rates are rising and borrowing capacity is being assessed at interest rates well above market projections, many are once again unable to secure finance.”
Vidler said there did seem like an element of déjà vu to the current lending situation which was likely to intensify the demand and supply imbalance in rental markets around the nation.
“The current market climate, with fewer buyers and more listings as well as reduced confidence levels, does remind me of the first year of the pandemic,” he said. “The people who bought a property at that time were able to secure excellent results because they purchased at a time when many others were unable or unwilling to do so. Likewise, the current inflation pressures are worrying many people, but I believe that they will be shown to be temporary in nature, rather that permanent, in the months ahead.”
Sydney brokerage New Vision Financial Services managing director Chris Brown (pictured above right) said it came down to uncertainty on whether to buy or not to buy for investors.
“We do not know how far interest rates will go and investors are wondering whether to try and capitalise now or later,” Brown said. “With interest rates going up, serviceability buffers drop, so many investors are no longer in a position to borrow money even if they wanted too.”
Brown said many of his investor clients were sitting tight and waiting for a sense of stability to return to the property market.
“If an investor purchased a property in the last six to 12 months, they have potentially lost equity in that property,” he said. “It is a big gamble for investors to buy in this market – although rental yields are slowly going up, all other expenses are increasing faster including council rates, water rates and body corporation fees.
“We know rental vacancies are at an all-time low, so if investors start selling off their investment properties, it will drastically add to the rental crisis.”
