3 minute read
Brainfood
from Cove magazine
RENTAL RETURN
RISING INTEREST RATES inevitably bring out the property pessimists, and there are plenty having their say in the current climate.
However, that doesn’t mean optimists are thin on the ground, especially when considering the number of property investors who have been getting into the market over the past year.
According to the most recent data from the Australian Bureau of Statistics, lending to property investors surged 17.3 per cent in the year to June 2022.
That compares with a slide of 9.6 per cent in lending volumes to owner occupiers – a figure likely skewed by the spike in the 2020-21 financial year driven by government incentives.
While June saw a dip in investor loans, a much sharper fall than owner-occupier loans, the solid gain recorded over the year is another indication that the property market is finding its balance following the heady pandemic-induced boom.
With aggregate lending volumes to investors and owner occupiers holding above $30 billion since April last year, and investor loans tracking at more than half of owner-occupier volumes throughout 2022, investors are seemingly taking up the slack of home-loan borrowers who have been rattled by interest rate increases.
According to the ABS data, despite home loan commitments for investors falling 6.3 per cent in June to $10.5 billion, the figure is still 101 per cent higher than immediately before the pandemic hit in February 2020.
In short, property investors are returning to the market after many cashed in their chips during the pandemic – with some getting out early when WORDS NICK NICOLS
measures were introduced to protect tenants from evictions and others taking advantage of big capital gains as the market peaked much later.
The recent volatility of global share markets is touted as one reason for investors returning to the property sector, with investors attracted by persistently tight vacancy rates and rising rents offering attractive yields.
Figures released by SQM Research showed vacancy rates nationally tightened further to 1 per cent in June this year, down from 1.7 per cent 12 months earlier.
That may change in the near term, especially in regional areas, according to Louis Christopher, managing director of SQM Research.
“The rental market remains significantly in favour of landlords,” says Mr Christopher.
“However, there are now signs of a peak in the rental market in regional Australia with a larger number of regions now recording rising rental vacancy rates and some falls in rents.
“While capital city rents continue to march higher, it’s possible we could be near the peak in the national rental crisis.”
It’s important to note that the Real Estate Institute of Queensland considers a healthy market as one with a vacancy rate of between 2.6 and 3.5 per cent, so there’s still some way to go before these levels are achieved.
Certainly, rising interest rates are having an impact on consumer sentiment, and that’s their purpose, but the extent of the hit to property prices remains a guessing game.
However, adding pressure to property demand is the number of net overseas arrivals to Australia.
While volumes are still at less than half of those at the end of 2019, the most recent data from the ABS shows a net gain of more than 23,000 people in May.
The near-term trend for net arrivals is tracking higher.
But there’s also another interesting forecast that offers promise for the premium end of the property market.
According to the Henley Global Citizens Report, multi-millionaires are on the move around the world and Australia is shaping up as one of the most sought-after destinations in 2022.
The report expects Australia to experience a net gain of 3,500 high-net-worth individuals this year, just behind the United Arab Emirates at 4,000.
These will be among the 88,000 wealthy individuals that Henley says will make the move to destinations including Singapore, Israel and Switzerland this year, increasing to 125,000 next year.
If the latter forecast is met, it will be the biggest migration of high-net-worth individuals globally in the past ten years.
Notably, Australia is the second most popular market in the world for the mega-rich who have largely sat tight throughout the pandemic.
Australia’s forecast gain for 2022 is more than twice the 1,500 affluent migrants expected to relocate to the US.
One of the reasons, according to New World Wealth, is that Australia is rated one of the five safest countries in the world for 2021-22, along with Switzerland, Malta, Iceland and New Zealand.
