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As the rental property shortage continues, new research has found that 19% of Queensland investors are considering selling in the next 12 months.
This will add further downward pressure on the Queensland housing market, which would deplete the supply of rental properties, especially if investment buying activity remains low.
Property Investment Professionals of Australia (PIPA) is the industry body representing property investors. The 2022 PIPA Investor Sentiment survey found three of the top four reasons investors may sell their property in the year ahead is because they feel that they have lost control of their assets.
“Neither PIPA nor PICA (Property Investors Council of Australia) were invited to the 2022 Queensland Housing Summit which occurred on October 21,” said PIPA chair Nicola McDougall (pictured above left). “PIPA and PICA both submitted formal requests to be invited to the housing summit a number of weeks ago so that private investors could be represented at the forum, yet it was nothing but silence from the state government until the afternoon before the summit when we got the official knock-back.”
PICA chair Ben Kingsley (pictured above right) said he questioned how the summit could achieve meaningful outcomes without the input from the people who provided the majority of rental housing.
“My first question to the Queensland Premier [Annastacia Palaszczuk] is, ‘With over 30% of your population renting, who or which association at this summit is directly and specifically providing the voice and input of behalf of the one-third of the property owners, those being private rental landlords?’” Kingsley said. “I’m very concerned that the premier may be missing this very important cohort and without their input or buy-in, she may not achieve any meaningful outcomes from the summit.”
McDougall said investors were clearly feeling like they had lost control of their real estate assets, but seemingly they still don’t deserve a seat at the table.
“In fact, the recent PIPA survey found that 29% of investors are considering selling a property because of changing tenancy legislation making it too costly or hard to manage, followed by 27.5% saying the threat of losing control of their asset because of new or potential government legislation and 23% saying the threat of rental freezes being enforced by governments,” she said. “If the percentage of investors who are considering selling winds up doing so, then we are going to see even higher rents as well as a sharp increase in homelessness – especially in Queensland, given 45% of investors sold at least one dwelling there in the two years to August.”
McDougall said the significant uptick in interest rates in such a short period of time resulted in many borrowers and investors not being able to secure loans to add property to their portfolios, which would create a further drag on markets in the months ahead.
“In fact, many of these borrowers are stuck on the sidelines due to the servicing buffer of 300 basis points still being applied to lending applications – even though interest rates are significantly higher now than when APRA announced the measure in October last year,” she said. “There is an element of déjà vu about this situation, with a similar circumstance occurring when caps on investment lending as well as higher rates more generally for investors wiped out lending possibilities for many during the 2010s. The flow-on effect from that decision was the continued reduction in investment activity hit rock bottom at the start of the pandemic, when the percentage of investors active in the market was just 22.9% compared to a long run average of nearly 35%.”
McDougall said 16.7% of property investors had sold at least one dwelling over the past two years, adding pressure to rental vacancy rates.
“This was outlined in the 2022 PIPA Annual Investor Sentiment survey as record lows around the nation with the usual volume of investors absent from the market for years,” she said. “While opportunities clearly exist for homebuyers and investors in the current market, if they are unable to secure finance, then we are likely to see a further reduction in prices as well as sustained downward pressure on vacancy rates for some time yet.”
McDougall said PIPA had been warning about the potential rental undersupply for five years now, but governments had repeatedly refused to listen.
“When we warned about the potential impact from lending restrictions on rental supply back in 2017, no one took any notice, and when we started highlighting the looming rental undersupply some two years ago, again we were ignored as real estate zealots,” she said. “It was clear that investors were sick and tired of being treated appallingly by policymakers who continually believed that they were an endless supply of revenue for their coffers. When nearly 162,000 rental dwellings disappear in Queensland in just two years – because governments thought private investors would forever shoulder the burden of providing rental housing while being taxed and taxed some more – well, have we got news for you.”
Originally Published: Jayden Fennell | Broker News | 1 November 2022