10 insights into the investment property market
As the year draws to a close its good to reflect on the property market for investors. Although there have been some challenges there are also some real positives for investors.
In recent news, the rental market squeeze continues as vacancy rates decline while rents rise, house prices on track to reach new record highs, the number of cheap rentals plummets as it becomes cheaper to buy than rent one in three homes across the country and investor hotspots revealed.
Each month we pull together 10 insights impacting the investment property market. Read on for this month’s instalment…
- 1 in 3 homes are cheaper to buy than rent. According to PropTrack data, 36.3% of homes across the country are cheaper to buy than they are to rent. Buying conditions are “most favourable” across Queensland, South Australia and Western Australia. According to CoreLogic, Australian rent values increased a further 0.7% in October, taking the national annual increase to 8.1%. Over the September quarter, the median weekly advertised rent on realestate.com.au was recorded at $550 per week – an increase of 3.8% over the quarter and 14.6% over the year, according to PropTrack.
- Property prices to hit new peaks. Both CoreLogic and PropTrack announced growth in house prices across every capital city except Darwin over October. CoreLogic’s Home Value Index rose 0.9% in October, indicating that dwelling values had regained most of the losses from the recent downturn and will soon surpass their previous peak to reach a new record high. According to MyHousingMarket, October saw the 9th consecutive rise in national house prices and the fastest monthly rate of increase since June, while unit prices were also up sharply. Data from SQM Research showed national combined dwelling asking prices rose by 1.2% to hit a record high of $805,680 in October.
- Vacancy rates continue decline. According to SQM Research, the national vacancy rate in October fell a further 0.1% to hit a low of 1.0%. Across the nation, just 30,307 properties were available over the month. Domain’s Vacancy Report showed an even more dire state – with combined capitals and combined regional rates both sitting at 0.8% for the month. According to PropTrack, the vacancy rate has fallen 56% since March 2020.
- Number of cheap rentals drops nearly 50%. Over the last 12 months, the national median rent has risen by 15% from $480 to $550 per week. Homes with rents of below $400 per week are now down to just 11% of all rental stock – half of what it was in 2022 – according to realestate.com.au CoreLogic notes that almost 500,000 migrants have landed in Australia in the past 12 months, helping to push rents up an average of 18% in some areas of Sydney, Melbourne and Perth.
- Building approvals dip. Data from the ABS showed the number of residential dwellings approved fell 4.6% in September. The value of new residential building fell 3.6% to $5.83 billion. The HIA said that the volume of new house approvals remained around its lowest level in a decade due to the weight of interest rate hikes, with the rate rises hitting Sydney and Melbourne the hardest.
- Investor bites: ABS figures showed the number of new loans to investors rose 2.0% to $8.95 billion in September, while the number of refinancing loans fell 6.4% to $6.0 billion. PIPA notes the data shows the number of new investor loan commitments has fallen more than 27% since interest rates started rising in May last year, and that there has been an increase in investors selling off their rentals.
- Regions wrap: Regional markets lag capitals’ rent and value growth, according to CoreLogic’s Quarterly Regional Market Update. API Magazine reported regional property markets in popular coastal and holiday destinations are a mixed bag in terms of capital growth and rental yields, with land tax and regulatory changes hitting some areas harder than others.
- RBA lifts interest rates. At its Board meeting on 7 November, the RBA decided to lift the official interest rate 0.25% to 4.35%. According to Finder.com.au, borrowers with a $590,000 mortgage will now be paying out around $1,345 more per month than they were in April last year, while CoreLogic notes the extra 25 basis points translates to around a further $80 per month in mortgage repayments on a $500,000 loan (as reported on Property Update). According to RateCity, the average Australian has seen a 30% drop in their borrowing power since the RBA began lifting rates 19 months ago
- WA Government beat: The WA Government announced the introduction of a $24.4 million Rent Relief Program to assist those at risk of eviction and experiencing rental stress. The state also announced new regulations for un-hosted short-term rental accommodation which includes a $10,000 incentive for owners to transition properties to the long-term rental market. A new tenancy reform bill was also introduced into the WA Parliament
- In the news: A landmark High Court decision to hold landlords accountable for unsafe and unhealthy housing could make waves Australia-wide, with a compensation firm now investigating the potential for a class action over dilapidated rental homes (as reported on Real Estate Business).
Thankyou to EBM Landlords insurance for assisting with compiling this article. EBM, a well respected Insurance provider https://www.rentcover.com.au/
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.