The number of people taking out new loans to invest in property increased by 2.9% in March according to the Australian Bureau of Statistics lending indicators.
But property investment numbers are a long way off where they need to be to solve the rental crisis, with a vast gap between the demand for rental accommodation and properties available.
Engaged Finance mortgage broker Mathew Spiteri (pictured) said, overall, there were fewer investors purchasing property and that would increase first home buyer activity and cause rental prices to climb higher.
“It [higher rents] will impact people’s ability to save for a home deposit and will make it even harder for first home buyers to crack into the market and compete with more experienced buyers,” Spiteri said.
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The Melbourne broker said with fewer investors buying into the property market, it would decrease the volume of available rental properties.
“This means an increase in competition for properties available and competition amongst renters for properties will increase further,” he said.
“Rental properties across the country are achieving record prices from prospective tenants just to secure a tenancy.”
Spiteri said many investors were considering selling their investment properties in today’s buyers’ market.
“With interest rate rises now happening, it will decrease borrowing capacities and will mean people will not be able to borrow as much,” he said.
“I encourage brokers to educate their property owners and purchasers with historical data. History tells us the Australian property market always recovers and property prices will continue to increase over time. Forecast for what might happen in the future and prepare your clients for this.”
With investor activity recording historical averages, the rental crisis was not going to be remedied soon according to Atlas Property Group director and buyer’s agent Lachlan Vidler.
“The latest data to March 2022 shows investors comprise 35.1% of mortgage demand by value, up from a recent record low of 22.9% in 2020,” Vidler said.
“One only needs to consider that out of about 2.5 million rental properties in Australia – according to the last census – there were only about 37,000 vacant in March this year.”
Vidler said to put this into perspective, there were nearly 90,000 vacant in December 2016 which according to SQM research was the most recent peak vacancy rate period.
“One of the major reasons why our rental market is so severely undersupplied is also because a huge number of investors sold their properties to owner-occupiers last year,” he said.
“Their motivations for doing so were no doubt varied but the potential risk of having to continue to provide accommodation for tenants during the pandemic, while receiving no rent in return, was likely a valid concern for many.”
Vidler said there was a long way to go before the situation would improve.
“New investors need to be diligent in their property and area selections because not every part of the nation makes a sound investment location over the medium- to long-term – regardless of the current upswing in weekly rents,” he said.
