- Rental pressure to increase due to decreased property investor activity.
- Investment loan commitments dropped by almost 28 per cent, says ABS.
- Investor finance was below the decade average, according to ABS.
Higher interest rates are likely to put even more pressure on tenants, as investor activity continues to decline on the back of record-low vacancy rates.
According to the Australian Bureau of Statistic (ABS), the number of new investment loan commitments has dropped nearly 28 per cent since December 2021, as borrowers struggle to get finance.
Propell Managing Director Michael Pell said the result of fewer investors will mean an already tight rental market is going to get even tighter.
Mr Pell said “The volume of new investors has fallen off a cliff because of the rising interest rate environment preventing many from accessing finance at a time when our rental markets are critically undersupplied,
“Analysis of latest official lending data also found that the number of new investor loans had been steadily increasing from the low point in May 2020 until about June last year, which is when the current investment downturn began.”
Investor finance was just 33.6 per cent of total new mortgage lending through the month of December, according to the latest ABS Lending Indicators, which was below the decade average of 34.6 per cent.
Pell said with investment activity again falling below the decade average there was little relief in sight for renters.
“When you consider that rents have risen by double digits over the past year, as well as softer market conditions, it is actually ideal timing for would-be property investors to enter the market,” Pell said; “In fact, it is those prospective investors, who perhaps already own a home, who are the best placed to take advantage of the current market dynamics, whilst also being unlikely to face the lending headwinds that existing investors may be experiencing at present.”
According to CoreLogic, annual growth in Australian rent values was 10.2 per cent in
the 12 months to December, which was a new record high.
While the latest data on vacancy rates from Domain showed a fall to a record low 0.8 per cent across the country.
Pell urged investors to take the plunge: “There is no question that the rental market is very tough for renters, which is why we need more investors purchasing property to help alleviate the current critical undersupply of rental properties,
“With less buyer activity more generally, first or second time investors with budgets
in the $600,000 to $800,000 price bracket are currently well placed to secure
properties with capital growth potential as well as solid yields, especially across
Southeast Queensland, and in strategic locations in New South Wales and Victoria” he said.
