Investors sitting out
Investors are sitting out the boom, at the moment. Image – Canva.
  • All factors that should attract property investors are in place, argues Rob Druitt
  • However, many investors have sold, exited the market, or still on the sidelines
  • A mixture of events and circumstance have left many investors battered and bruised

Although the proportion of investors in the market has risen this year, it is still well below 10-year averages, according to the ABS.

“You would think with rising rents, soaring property values, and the lowest interest rates in living memory investors would be flooding back into the property market. Not so!”

Rob Druitt, Druitt and Shead Real Estate

Based in the northern suburb of Scarborough, the 30+ years experienced director and former REIWA President is perplexed as to why investors are still thin on the ground. From his viewpoint, at least.

Why are investors not taking the lead and helping to alleviate the chronic shortage of rental properties in Perth and across the state?

“There are a number of reasons,” said Mr Druitt, “Foremost the exponential increase in owner-occupier demand since the end of our short but memorable Covid-19 lockdown in the first half of 2020.”

Rob Druitt Scarborough Beach
Rob Druitt (inset) on backdrop of Scarborough Beach. Images – Supplied/Canva.

Wounded investors

Property investors had been left battered and bruised over the previous six years from declining rents, property values and increased costs and have left the property market alone.

“The effective doubling of land tax in 2015 for multiple property owners was another nail in the coffin,” said Mr Druitt.

After the initial pandemic shock, and just as the market seemed to be (finally) coming out of the doldrums, the WA government extended the moratorium on rent increases and evictions, further spooking investor confidence.

With prices recovering, some property investors decided to sell their investment properties, and get out of the market altogether.

Owner-occupiers’ boom

“Add to the mix the influx of cashed-up returning ex-pats desperate to buy a home, an unprecedented amount of both federal and state government building bonuses and incentives, then result was any available property on the market evaporated overnight. It’s no wonder we have a rental crisis,” he said.

Owner-occupiers have been driving the market right around Australia, both in the capital cities and regionally.

“For the first time in my thirty years in the property sector, all markets across the country are in positive territory at the same time. Sydney now has a median house price of over $1.3 million and climbing at an alarming rate.

“Premium property growth is mirrored in all capital cities. Some may say the property market is overheated, particularly on the East Coast but the Reserve Bank have stated they won’t be raising interest rates in the next three years so really the only other lever they have to cool the market is to reduce the supply of money and restrict borrowing conditions.”

Rental shortage

If this is necessary it will only further limit the number of investors entering the market, not good news for renters, argued Mr Druitt.

“The market will adjust as it always does, but it is time to reflect on the important role the private investor plays in providing a supply of rental homes. Investor activity in Perth has improved over the past six months, with investor finance almost doubling from activity seen this time last year, to $462 million and coming off a low of around $250 million a month. It’s still a far cry from the $1 billion a month spent by investors in peak years of 2007 and 2014 (source: REIWA).

For potential property investors all the signs are right to invest in Perth, says Mr Druitt.

“[Perth is] one of the most affordable capital cities in Australia at the beginning of a rising market with very strong rental growth forecasts,” he said.

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