Investor activity has fallen significantly since interest rates started rising
Investor activity has fallen significantly since interest rates started rising. Image: Canva.
  • Number of new investor loan commitments have dropped over 27% since May 2022.
  • Vacancy rates will remain low and rents high until investor activity stabilises.
  • Melbourne and Queensland markets showing resilience despite pressures.

Investor activity has dropped precipitously since interest rates started increasing, according to the PIPA (Property Investment Professionals of Australia) National Market Update – October 2023 report.

According to the latest ABS lending indicators, the number of new investor loan commitments have fallen more than 27% since interest rates began rising in May last year.

Moreover, the number of new owner-occupier loan commitments for dwellings rose 2.5% – 12.3% lower compared to last year.

PIPA Chair, Nicola McDougall, said record low vacancy rates appear to be entrenched given investor purchases have not only fallen significantly over the past 18 months, but many thousands are selling off their assets too.

Nicola McDougall
PIPA Chair, Nicola McDougall. Image: PIPA

“It’s clear that the normal flow of investment activity – both inbound and outbound – have been off-kilter for some time, so, until that changes, vacancy rates will remain at record lows and rents will climb ever higher,” she said.

Northwest and Southwest take the lead in NSW

As New South Wales faces challenges related to supply constraints, high population growth, and affordability, most housing activities will be concentrated to the Greater Sydney area, according to inSynergy Advisory investment property research manager and senior economist, Dr Kevin Hoang.

“Affordability will continue to be the primary driver of housing price growth in Sydney,” he said.

“As a result, the Northwest and Southwest regions, along with properties priced under $1.5 million, are expected to lead in terms of growth prospects.”

Melbourne’s resilience

Hotspotting director, Terry Ryder, said despite facing challenges during the pandemic, Melbourne has shown stability and resilience in its property market.

However, rising interest rates and other demands have caused investors and homeowners to look at units and townhouses in lieu of standalone homes.

But Ryder also pointed to significant infrastructure projects, such as the North East Rail Link and the proposed Suburban Rail Loop, as points to promote continued growth and stability in Melbourne’s property market.

Buyer confidence amplified in Queensland

Even with inflation and rising interest rates, property prices across Queensland have soared by 9.1%, according to Inspire Realty founder and CEO, Colin Lee.

“The housing market in Brisbane shines, outpacing the unity market, and nearly half of this year’s growth transpired in the last three months,” said Lee.

Lee said that a pause in interest rate hikes, which has coincided with the growth in Brisbane, might have amplified buyer confidence.

“During the September quarter, Brisbane experienced a remarkable property price growth rate of 3.9%,” he said.

“With HVI indicated a continuation of this trajectory, there’s little to suggest any slowdown in house prices.”

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