- More property investors are re-entering the market.
- New South Wales is receiving the bulk of the interest.
- Perth investor activity is lower, despite highest gross rental yields among the capitals.
The proportion of property investors active in the marketplace has returned to the long-term average, according to CoreLogic research director Tim Lawless.
“According to ABS lending indicators, at a state level NSW is receiving the bulk of the interest, with investors accounting for 38% of the value of new mortgage lending across the state,” he said.
However, Lawless added that investments only comprised 24.5% of mortgage commitments for Tasmania and 28% in Western Australia.
Perth’s strong fundamentals
The Western capital has some of the best prospects for capital gains, according to Lawless, with Perth’s highest gross rental yields reaching 4.9%.
“Additionally, the entry point to the market is achievable, with Perth home values recording the lowest median dwelling value of the state capitals and prices are proving to be pretty resilient through the rate hiking cycle so far,” said Lawless.
“In fact, Perth is the only capital city where housing values have recovered to a new record high.”
Despite these fundamentals painting an attractive picture for investors, very few are taking the plunge in WA.
“What really strikes me is that Western Australia, or Perth as the capital city, has a lower portion of investment activity but the highest gross rental yields among the state capitals, at 4.9%, and arguably some of the best prospects for capital gains.”
Tim Lawless, CoreLogic, research director
Accounting for lower investor activity in WA
Lawless could not point to a single factor that accounts for lower investor activity in Perth, but patterns have emerged over the past few years.
“Perhaps there is a level of herd mentality playing out, where more investment is flowing into the Sydney or NSW market despite the unaffordability and low rental yields,” he said.
“Another reason why investor demand is weak may relate to the significant volatility in Western Australian housing values during and after the mining boom.
“After surging between 2004 and 2014, Perth home values plunged by 20% between 2014 and 2019 amid weak economic conditions and negative population growth.”
Real Estate Institute of Australia (REIA) president Hayden Groves agreed, adding that Perth’s property market performance had been poor from 2014 through to 2021, with zero capital growth and flat returns during that period.
“As a result, local investors chose to quit their investment once the market recovered, slowing investor numbers overall.
Meanwhile, interstate investors look to Perth as ‘an unknown market’ and prefer, for the reasons outlines above, to stay in familiar markets.
“They also look at the numbers and whilst they see Perth as affordable, they remain concerned over its boom and bust history.”
