Investment Property Trends in 2024: What’s Driving Investor Activity?

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Investor activity in Australia’s dynamic real estate market is at a turning point. New investor loans are on the rise, according to recent data, but some investors are also retreating. What is actually going on, then?

 

Investor Activity on the Rise

Nationally, the number of new investor loans has increased by 18.8%. A significant jump, especially when compared to the slower pace of new properties hitting the market. Investor demand is strongest in high-growth states like Western Australia (WA), Queensland (QLD), and New South Wales (NSW), while growth is more subdued in states like Victoria and Tasmania due to factors like soft capital growth and rising holding costs.

 

Two Contrasting Narratives

Concerning Australian real estate investment in 2024, there are two contrasting points of view:

  • Investors Are Leaving: Some investors are opting to leave the market due to rising interest rates, tenancy reforms, and higher property taxes.
  • Investor Activity is Up: Despite these challenges, investor loan commitments are growing. Investor loan approvals have significantly increased, according to data from the Australian Bureau of Statistics (ABS), suggesting that more people are still keen to purchase investment homes.

Which story is true, then? It appears that both are taking place at the same time, with more investors joining the market and others leaving.

 

Regional Differences Matter

While national trends show growth in investor activity, the picture looks different across regions:

  • Victoria: As some investors are discouraged from holding onto properties due to high interest rates and slow capital growth, the number of new investor listings has increased above normal.
  • Queensland and Western Australia: These jurisdictions continue to have below-average investor listings, indicating that high-growth regions continue to see strong demand.
  • Tasmania: Rising interest rates and declining home values have caused a rise in investor listings over the previous five years.

These regional patterns demonstrate the substantial influence that local market conditions can have on investment behavior.

 

Shifting Investor Profiles

The market for investors is likewise changing. Less indebted purchasers are joining the competition, even while highly leveraged investors may be retreating. The Reserve Bank of Australia (RBA) has noted a rise in lower leverage investors, which could signal a shift in the types of investors dominating the market. Although the underlying quantity was still quite low in September 2024 (711 loans), ABS loan data also indicates that the percentage of first-time home buyer loans for investment acquisitions has increased.

It’s interesting to note that first home buyers are increasingly choosing investment homes as a more cost-effective way to enter the real estate market.

 

Looking Ahead: Will Investor Activity Continue to Rise?

Despite the recent spike in investor loan commitments, there are indications that the market may soon cool. As affordable properties with strong capital growth potential become scarcer and interest rates remain high, investor activity could soften. However, it’s uncertain if this will result in a slowdown or an increase in sales given potential interest rate reduction.

 

In Summary:

Investor activity is up across much of Australia, particularly in high-growth regions. But rising costs, taxes, and interest rates are having a notable impact on investors in certain states. As the market continues to shift, it’s important to stay informed about how these dynamics are evolving.

 

For the full article: CoreLogic, What Is Going on with Property Investors? (2024).