The tight property market in Australia is prompting more property investors to come back. This is good news for renters because the increased investor activity will help balance the rental market by adding more rental properties.
Despite a slight 1.3% dip in new investor loans in December, lending to investors surged by 20.4% over the year, hitting its highest point since August 2021.
In contrast, owner-occupier lending saw a 5.6% decline for the month but remained 7.4% higher compared to the same period a year ago, as per the latest lending data from the Australian Bureau of Statistics.
Rental market conditions remained challenged after a difficult 2023. In December of the previous year, the national rental vacancy rate, reported by PropTrack, stood at 1.1%, lower than the 1.3% recorded during the same period in the previous year. Rental prices in major cities rose by 13% throughout the year, creating substantial financial challenges for tenants. (see chart)
PropTrack senior economist Paul Ryan noted that the tight rental markets nationwide were enticing property investors to re-enter the market. “The re-emergence in investor activity in 2023 heralds good news for the overall health of the market.”, Mr. Ryan said.
Rental Inventory Moving at Gradual Pace
Australia’s current rental market condition can be attributed to property investors’ activity during the pandemic where the majority decided to sell their rental properties. This decision initially stemmed from significant uncertainty about the economy and rental demand as borders closed. Later on, it often served as a response to the substantial growth in home prices observed as the pandemic progressed. (see chart)
Proptrack data shows that throughout 2022 and 2023, the proportion of rental properties being sold by their owners has stabilised.
Although this improvement is notable compared to the decline experienced in 2021, the growth rate remains significantly below pre-pandemic levels. Importantly, this rate of growth has not been swift enough to offset the rapid surge in rent prices.
Therefore, the participation of investors in the current property market environment will result in more favourable conditions for renters. Property Investors play a vital role in funding new development projects.
Navigating the world of Property Investment
There are various approaches to consider when purchasing an investment property. At High Income Property, we aim to show you how to create wealth with property, and to that end, we aren’t blinkered or limited in our approach. Instead, our property consultants help you choose the appropriate strategy based on your specific circumstances and what you want to achieve.
To simplify the process, we categorise property investment into three broad groups mainly:
High Cash Flow
Also known as positive cash flow properties, this approach involves the rental income generated from your investment property exceeding the associated costs of ownership (such as mortgage and insurance payments, rates, maintenance, tenant acquisition costs, etc.). Essentially, as a property investor, this means you make a cash profit every month from the property.
The idea behind high growth property investment strategies is that the property you purchase experiences substantial appreciation in value during your ownership, allowing you to gain a considerable profit when you eventually choose to sell.
In simpler terms, it involves seeking properties in areas with the potential for long-term growth, enabling your property to significantly increase in value over time.
This strategy combines two key approaches: positive cash flow and high growth. It involves owning various types of properties in different locations. This approach aims to generate rental income and long-term value growth. Having different types of properties allows you to adapt to changing investment goals over time.
However, building a diverse portfolio isn’t just about acquiring more properties. It’s about being prepared for different market conditions and prioritising quality over quantity in the long run.
Talk to High Income Property to find out more about how to invest in property
If you already have an idea about what property investment strategies might work for you, or you need assistance to run through all of the options available to you, our expert property advisers are here to help.
Call High Income Property at (02) 8007 4001 or email us today and one of our team will be only too happy to help you understand the benefits of a range of different property investment options.