Savvy investors step up as ‘hysteria’ passes

May 2024Karen Millers

The volume of property investors active in the market has fallen dramatically over the past two years. But savvy operators are returning now that the record-low interest rate-induced ‘property hysteria’ has passed, a national buyers’ agency reports.

Propell Property managing director Michael Pell says government schemes such as HomeBuilder, as well as super-low interest rates, have dramatically increased the usual volume of new property investment activity during the pandemic.

“It’s important to understand the difference between the number of investors and the value of their activity as this clearly shows that investment activity has returned to more historical averages,” Mr Pell says.

“Of course, we also know there has been a solid uptick in investors exiting the market, too. So, investment activity is nowhere near what is needed to help remedy the current rental crisis.”

The Australian Bureau of Statistics Lending Indicators for March show that the number of new loan commitments for investors has dropped nearly 22 per cent in the past two years.

Mr Pell says overall property buying activity was supercharged during the pandemic but with the cash rate now 425 basis points higher, owner-occupier activity has also reduced.

“Everyone gets caught up in the value of loans increasing of late but, of course, this is merely a reflection of the fact that property prices are much higher than they were a few years ago,” he says.

“The emergency interest rates during the pandemic resulted in a once-in-a- lifetime, property-buying frenzy with owner occupiers and investors bringing forward their purchasing plans to take advantage of the cheap money on offer.

“Those days are done, so we now have market conditions that are more stable and sustainable – but perhaps not as exciting as they once seemed, which is actually the perfect time for investors to strike, with the most-educated ones currently doing so.”

Mr Pell says seasoned investors are looking past short-term cash flow considerations due to higher interest rates at present.

Instead, investors who may own one or perhaps two properties were making the most of the reduced property- investment buying activity, he says.

“They recognise that now is a good time to buy – especially those with budgets between about $700,000 and $1.5 million,” Mr Pell says.

“To tell the truth, I don’t think I’ve ever seen as many savvy investors with the same mindset at the same time before.

“They have sat out the herd mentality that was prevalent a few years ago and waited patiently for the opportune time to re-enter the market when there were fewer competitors and less-overall property hysteria.”

The 2023 PIPA Annual Investor Sentiment Survey revealed that about 55 per cent of investors believed the next 12 months would be a good time to buy.

Mr Pell says seasoned investors are seeking out opportunities across Southeast Queensland, in regional and coastal areas of New South Wales, as well as in Melbourne.

Originally Published: My Weekly Preview, Sunshine Coast | 16 May 2024

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