Investors are re-entering the property market after stepping back in recent years, lured by expectations that home values will continue to climb, according to fresh analysis from realestate.com.au.
National home prices are up 5.3% over the past year, adding around $47,900 to the value of the median home, according to PropTrack. The latest Home Price Index shows prices rose 0.5% in August – marking eight straight months of growth and setting a new record high.
REA Group senior economist Eleanor Creagh (pictured left) said interest rate cuts have boosted borrowing capacity and confidence.
“As a result, the housing upswing, once narrowly led by a handful of cities, is broadening and closing the gap between outperformers and laggards, ushering in a more uniform phase of price recovery across the capital cities,” Creagh said.
Demand has re-accelerated in Sydney and Melbourne.
“Melbourne is closing in on its 2022 peak, with relative affordability and strong population growth restoring its appeal,” she said.
Auction clearance rates are reflecting the trend, holding around 70% nationally as the spring selling season begins.
The latest ABS data confirms the shift. In the June quarter, new investor loan commitments rose 3.5%, with the value up 1.4%.
“There were 49,065 new investment loans approved this year in the June quarter, a 3.5% rise (1,656 more loans) compared to the previous quarter,” said ABS head of finance statistics Mish Tan. “The average loan size rose by $1,103 to $674,259.
“The 3.5% quarterly growth in the number of investment loans follows two consecutive quarterly falls. While annual growth slowed to 0.8% from 27.0% in the June quarter 2024, the number of new loans remained historically high.”
The Northern Territory recorded the largest quarterly increase in investor loans (21.1%), followed by Western Australia (1.4%).
Just a few years ago, investors were heading for the exits. ATO data for 2022/23 showed the steepest annual decline in individual property investors in over 25 years, reversing decades of steady growth.
At the time, more than 7,000 investors exited compared to the previous year, with participation levels hit hard by rising rates.
REA Group executive manager of economics Angus Moore (pictured right) said much has changed since then.
“Remember, 2022/23 is a while ago, and since then, we’ve seen a big pick up in investors buying in,” Moore said. “That period of time coincides with when the Reserve Bank of Australia was rapidly raising rates, and saw a pullback in housing market activity broadly, including from investors.”
He noted that investor activity is now reaching record levels in some regions.
“The share of new loans going to investors is around its highest in decades in Queensland, WA and SA, and its highest since 2017 in NSW,” Moore said. “Victoria is the only state where we haven’t seen that pick-up, and investor activity remains more subdued there.”
While investor demand is rebounding, industry groups warn that policy settings remain a key concern.
The Property Investment Professionals of Australia (PIPA) said regulatory uncertainty is undermining investor sentiment.
“All investors want is clarity and consistency – they can’t plan for the future when the rules keep changing,” PIPA chairman Lachlan Vidler said.
“We need more rental properties, not fewer. If the government continues down this path, they’ll find themselves with an even bigger rental crisis on their hands – and fewer people willing to help solve it,” Vidler said.
PIPA research found that nearly half of investors were concerned about potential tax changes.
“Nearly half of all investors – 44% – said the future risk of changes to negative gearing or capital gains tax would influence their decision to sell,” Vidler said. “That’s a flashing red light for policy makers.”
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