CoreLogic’s latest report on Investor Activity in the Australian Property Market reveals that there hasn’t just been a softening during the COVID19 pandemic; in fact, investor activity has been falling since early 2015, across all Australian states.
The main reason attributed to this is the macro-prudential policies that were implemented in Australian mortgage lending, which did tighten lending criteria and exclude some would-be investors from commencing or growing their portfolio.
The latest Australian Bureau of Statistics (ABS) housing finance data shows the portion of housing finance lent to investors fell to a record low of 23.5% in August; significantly lower than the decade average of 36.1%.
CoreLogic reports the decline of the property investor has been brought about by multiple factors. These include:
- temporary policies implemented between 2014 and 2019, which limited lending products favoured by investors;
- mortgage rate premiums for investor loans;
- less appetite for high LVR and interest only lending from the banking sector;
- less certainty around prospects for capital gains;
- high levels of housing construction which have softened rental returns;
- the recent global pandemic, which has created a particular negative demand shock to the rental market, thereby further inhibiting returns.
Despite the overall decline, nationally there are differences between the states; for example: New South Wales and Victoria have experienced the highest declines across Australia at 27.4% (NSW) and 23.5% (Vic), along with Australian Capital Territory at 24.6%. Queensland and South Australia recorded 20.4%; whilst the Northern Territory came in at the lowest at 12.6% – it must be noted Darwin does currently have the highest rental yields of any capital city. Tasmania is down 16.4% and Western Australia 17%.
Just looking at Queensland, it must be noted that the figures here have been driven in part by the high levels of unit development in inner Brisbane which led to an oversupply and downward pressures on rent. However, in regional areas, and certainly here on the Sunshine Coast, we are currently experiencing a severe lack of supply in terms of properties available for rent versus those seeking rentals. It is almost at crisis levels and has become a regular news item in our local media. There is a strong healthy appetite for rental properties in the marketplace – investors can certainly expect high occupancy rates along with solid returns.
Changes in government legislation surrounding lending policies that take effect from March 2021 will also transform the lending landscape, with easing of some restrictive practices that will facilitate an easier pathway to borrowing for not only owner-occupiers but also investors.