Australia’s housing market churns investors
Jul 2024Karen Millers
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Australia’s housing market is experiencing “an exodus of investors” according to Jonathan Chancellor.
“Ray White calculated 35.8% of its sellers across Australia last week were investors, which was a higher investor exodus than June when it averaged 30.2%”, Chancellor wrote.
“It was the highest weekly percentage since March”.
Suburbtrends also argues that an “investor exodus” is underway, with over 40,000 rental homes becoming private housing in the last year in both New South Wales and Victoria, whereas.
“We need the rental pool to be expanding, not getting smaller”, Suburbtrends founder Kent Lardner said.
Lardner noted that soaring mortgage rates were behind the investor sell-off.
“It’s a survival strategy; it comes down to cost of living pressures. Negative gearing makes sense if your investments are profitable, but it becomes a lot less attractive when you’re digging deep into your own pocket each month to pay for an investment”.
“Investors who bought three or four years ago are the ones most reactive to rate hikes. Many didn’t plan for this level of interest rate”, he said.
Property Investment Professionals of Australia (PIPA) chair Nicola McDougall agreed.
“With the gap between weekly rents and mortgage repayments now significant, many investors simply cannot continue to manage the negative cash flow and are selling one or more of their investment properties to reduce their borrowings”, she said.
“Stop forever changing the goal posts for property investors. Investors deserve policy stability given they are purchasing properties that come with 30-year mortgages”.
The situation is not nearly as grim as Lardner and McDougall make out.
The latest Australian Bureau of Statistics (ABS) data shows that there were $10,670 million worth of investor mortgage commitments in May 2024, up from 29.5% from the same month in 2023:
As shown in the following chart from Justin Fabo at Antipodean Macro, investor mortgage lending has nearly risen back to the peak, driven by loans to purchase existing homes:
Google searches for “investment property” also suggests that investor borrowing will gather strength:
Finally, this rebound in investor mortgage lending is crowding-out first home buyers:
As a result, Australian home prices continue to break records:
So, while a larger number might be selling up, they are being replaced by new investors.
Therefore, the purported “investor exodus” is really just “investor churn”.
Originally Published: Leith van Onselen | Macro Business | 16 July 2024
https://www.macrobusiness.com.au/2024/07/australias-housing-market-churns-investors
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