In an episode of The Smart Property Investment Show, from REB’s sister brand SPI, Nicola McDougall, chair of the Property Investment Professionals of Australia (PIPA), discussed how legislation is impacting investor sentiment around the nation.

With PIPA’s latest Investor Sentiment Survey incorporating data from close to 1,300 participants, McDougall revealed that the number of respondents who sold at least one investment property over 2024 rose to 14 per cent, marking an increase from 12 per cent the year prior.

She noted that this slight uptick from the previous year showed that “more investors are leaving the market than coming back into it”, with the presently record low vacancy rates reflecting the impact of investor withdrawal on the wider rental crisis.

Delving further into this trend, McDougall shared that the number one and two locations in which investors are selling are Brisbane and Melbourne, at 26 per cent and 22 per cent of investors respectively.

While the chair acknowledged that Brisbane’s “very strong market conditions” heavily contributed to the city’s top sales ranking, she pointed to the recent spate of “anti investment” rental reforms in Victoria as a potential trigger for Melbourne’s investor exodus.

McDougall further stated that survey responses revealed a strong nationwide consensus among investors that “the equilibrium has swung too far in regard to tenants”.

“In the survey, it shows interest rate repayments have increased by tens of thousands of dollars. More than 70 per cent of investors indicated that their annual interest rate bill on their mortgages had increased by up to $60,000. The majority said between $20-40,000, that’s just their interest repayments, not other holding costs or operational costs,” McDougall said.

McDougall stated that these “much higher operational costs” have unproportionally increased in relation to rental costs, and said that for many investors, these rental reforms have proven to be the “straw that breaks the camel’s back”.

With findings from the Australian Taxation Office (ATO) also revealing that “about 70 per cent of investors only own one property”, McDougall emphasised that the perception of investors as “land barons or baronesses” is misleading.

“We’re talking about someone, probably a couple with a couple of kids, who have got their own home and decided to buy one property,” she said.

McDougall also revealed that investors are widely unaware of changing tenancy legislation in their jurisdiction, with investors instead widely relying on their property managers to inform them on updated laws as a result of the lack of formal communication strategies from state governments.

While McDougall said that “we all want to have properties that are safe for our tenants”, she stressed that new rental policies are leaving investors who cannot afford to bring their properties up to new rental standards with no other choice than to sell their property.

“Research this year showed that 44 per cent of these former rental properties were actually being bought by existing home owners. So you can safely presume that those properties therefore are no longer a rental property,” she said.

The chair also highlighted data from the ATO showing that the volume of investors with an interest in rental properties has “fallen through the floor”, and warned that the market is “not growing at the level that is required to replace the investors who are leaving at the same time”.

Weighing in on the intentions of investors, McDougall emphasised that many investors “intend to hold a property for 20 or 30 years”, with this long-term goal “made all the more difficult if the rug is continually pulled out from underneath your feet”.

Nonetheless, the chair said that policies “impact markets very quickly” and emphasised that “things can be turned around if policymakers are smart enough to recognise that investors are part of the solution”.

“We need to encourage investors to get into the market more and we need to especially encourage them to stay over the long term. And one way of doing that is stopping these continual changes to legislation,” McDougall said.

Listen to the full conversation with Nicola McDougall and Juliet Helmke here.

Originally Published: Sebastian Holloman | Real Estate Business | 30 October 2024

https://www.realestatebusiness.com.au/industry/28924-the-toll-of-anti-investment-policies-on-australias-property-markets

“Licensed by Copyright Agency. You must not copy this work without permission.”