Young Victorian homebuyers struggling to get on the property ladder are replacing investors in regional areas as they make a canny start into the housing market.

Outside of metropolitan Melbourne investor sales to investors have increased from 6.4 per cent to 9.32 per cent.

Meanwhile investor activity in Melbourne has decreased, falling from 24.8 per cent last year to 21.1 per cent this year, according to the 2024 PIPA Annual Investor Sentiment Survey.

Chair of Property Investment Professionals of Australia Nicola McDougall said she was optimistic about the city’s future growth.

“Though our market has been the most-depressed of any capital city in the nation over the past year, there are excellent future capital growth prospects,” Ms McDougall said.

She added that she believed Melbourne’s long-term capital growth potential remained promising.

“Investors who can navigate the current landscape with strategic foresight stand to benefit significantly in the future,” she said.

Areas such as Shepparton are witnessing booming rental markets, with approximately a third of homes in the area listed at the moment being rental properties.

For many investors, sales have been prompted by new rental reforms and property taxes.

Senior sales executive at Stockdale & Leggo Shepparton Darren Butler said the Goulburn Valley region’s rental returns offered a good return for investors.

“The influx of new migrants choosing to settle in areas like Shepparton are attracted by local amenities such as hospitals and universities,” Mr Butler said.

He said the vibrant rental market, driven by young millennials ‘rent-vesters,’ prefer to rent in locations where they want to live.

“We are seeing many young investors maintaining a good balance between rental returns and prospective capital gains,” he said.

“98 per cent of landlords that I deal with are excellent; if something needs to be done, they get it done to maintain their investment.”

The senior sales executive pointed to Goulburn Valley’s potential, which he said offered good returns as Shepparton showcased robust returns on investment and capital growth.

Board member of Property Investment Professionals of Australia Cate Bakos, acknowledged the high costs of compliance and significant rental reforms in Victoria, but underscored Victoria’s investment appeal.

“While compliance with safety standards, such as electrical safety, may be seen as costly by some, they undoubtedly lead to better long-term investment returns,” Ms Bakos said.

“Investors are fearful of large ticket items, but sensible reforms and potential drops in interest rates could boost market confidence.”.

The PIPA investment sentiment survey indicated that 87 per cent of investors were concerned about government interference, underscoring the importance of staying informed and adaptable.

Ms Bakos highlighted further challenges like high land tax and stringent rental standards as major headaches that spurred investors to consider selling.

“People accept interest rates going up, but investors in Victoria feel a sense of unfairness,” Ms Bakos said.

She warned of ongoing market instability – with the possibility of rental caps or rent freezes looming over the market.

Despite, the glimmers of potential future gains and the resilience seen in certain regional areas, the outlook for Victoria’s property market remains turbulent.

“If rental caps came in I think we’d see many investors leaving the market, more so than we currently see,” Ms Bakos said.

“I don’t think it’s likely as it’s not sensible, and I think our government would eventually realise this.

“There is a general feeling of having limited control over your asset when there are disproportionate rules favouring renters.”

Originally Published: David Bonaddio | realestate.com.au | 22 September 2024

https://www.realestate.com.au/news/regional-victoria-offers-a-silver-lining-for-millennial-home-investors-amid-market-chaos-pipa

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