- Inner city areas experiencing a surge in investor listings
- Investor selling not as high as peak in mid-2021
- Property investors selling despite lower new listings
Despite new listings sitting 20 per cent below historical levels, the number of investors selling out is still at or near the long term average, according to CoreLogic; new investor listings brought to the market over May are only 2.9% lower than the previous decade’s monthly average.
Head of Research, CoreLogic Australia, Eliza Owen said in Sydney, Melbourne and Perth, investor listings for May were actually higher than the previous decade’s average.
“This really signifies that investor selling activity is persisting in an environment where owner occupier selling decisions are waning,” said Owen.
“Overall sales volumes, while normalising around historic averages, could see a drop off amid a combination of a seasonal slowdown and higher interest rates.”
Inner city selling
Owen said at a more granular level, the proportion of investor listings on the market in May has shot up in inner city areas, traditional hot spots for multiple property owners.
“For example, the SA3 market ‘City and Inner South’ in Sydney has a historic 10-year average of 38% of new listings coming to market from investors.”
“In May it topped the list of regions with the highest proportion of investment listings, surging to 57%.”
According to Owen, some of the other locations that are seeing the highest levels of investor selling include, Parramatta, Eastern Suburbs and Inner West across Sydney.
Inner Melbourne and Brisbane Inner City are also seeing a surge in new listings from investors.
Adelaide – Central and Hills saw the most activity, while Inner Perth was the busiest in WA. Darwin and the ACT were also seeing over 40% of new listings from investors.
Still lower than peak
Owen said it’s also noteworthy that while investor listings have remained elevated – and appear to be on the rise – the share of investment listings overall is still not as high as the record peak in mid-2021, which was marked by a very strong capital growth period.
“In the year to July 2021, when the share of investment listings peaked, annual growth in the national CoreLogic Home Value index was 16.1%.”
“Generally, all capital cities except Hobart have a higher portion of investment listings than the historic average.”
Eliza Owen, Head of Research, CoreLogic
Drivers for investors selling up
Owen said it is not clear why investors are selling, however, there are a few things that might be prompting the sales.
“The first driver might be higher interest costs over the course of the year.”
“Based on average interest rates for investors, we estimate mortgage costs on a $500,000 loan will have increased $860 per month, to $3,213.
“While rents have risen at a record pace over the past few years, they generally have not risen as much as mortgage costs on a new loan.”
She said if the interest burden is becoming too high amid an already high inflationary environment, investors may be looking to offload their investment.
According to Owen, another key driver might be capital growth.
“If you look at a city like Perth, where the portion of investment sales surged in mid-2020 and remained high ever since, this may reflect investors finally getting some pay-off after a long period of decline in home values for much of the 2010s.”
“While east-coast cities like Sydney, Melbourne and Brisbane have seen a decline in home values since interest rates started to rise in May last year, Perth values have held fairly steady, and indeed reached a new record high in May this year.
“Not only is the portion of investor listings high, the volume of new investment listings through May were 19% higher than the previous decade average.”
Auction activity to drop
Meanwhile, auction activity is set to fall as homeowners sit on the sidelines and wait for Spring.
According to CoreLogic, auction activity in capital cities is expected to decrease by 4.9% compared to last week, with 1,850 homes going under the hammer.
The decline follows the usual seasonal winter trend of fewer auctions, with vendors waiting for spring. Sydney will have the most auctions, with 782 homes scheduled, up 2.4% from last week but down 12.1% from last year.
Melbourne will have 748 auctions, down 13.4% from last week and 25.2% from last year. Unit auctions in Melbourne have increased to 35.7% of total activity. The busiest auction location is Monash in the southeast, while Mornington Peninsula has only seven auctions scheduled.
