A property investor rebound is inevitable

Property investors have largely been absent from Australia’s property rebound, which so far has been driven by owner-occupiers (including first home buyers):

However, The AFR believes that property investor interest will reignite in 2021; although it will look far different to previous cycles:

Many investors have had a tough year. Apartment rents in inner Sydney and Melbourne have certainly fallen, vacancies are at historic highs and values have weakened.

With no foreign students and no migration, the vacancy rates in inner Sydney and Melbourne are extraordinarily high…

However, away from the inner suburbs of Sydney and Melbourne, the picture is quite different…

REA Group chief economist Nerida Conisbee says the next investment market will be different to the last. “It will be about regional activity, like south-east Queensland and regional NSW,” she says.

I couldn’t agree more.

As we know, mortgage rates have collapsed to record lows:

At the same time, rents continue to grow outside of Sydney and Melbourne, according to CoreLogic:

Rental yields across most other markets are also juicy, especially when considered against investor mortgage rates below 3%:

Thus, neutrally or positively geared properties are available outside of Sydney and Melbourne which should inevitably entice investors into these markets.

Unconventional Economist
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Comments

    • Yep, we’ve seen this movie before — muppets piling into the regions only to have their ar$es handed to them, often with a tasty 50%+ haircut on the prices they paid. Very cyclical in the regions. But I’m sure this time is different 😉

      • Agreed. WFH won’t be as big and as durable as most think.

        Managers have to manage. It’s very hard to show your management value when everyone is productively, autonomously working from home.

        A number of companies I deal with have already told their employees the party’s over, get back to the office.

        Regional house prices will swing wildly on this one social theme.

  1. Around here ( 4132 ) many of the older investment houses were sold during the trough and are now being done up by their new owners. When asked they say that with two low wages it is now cheaper to own than rent. It will be a race for the cheaper houses if we stay in control of the virus.

    • Jumping jack flash

      Where I am, 4502, it seems that everything has gone up about 50K just in the past few months.

      REA says Victorians are to blame, but I haven’t seen any around, and the borders have been shut for 6 months! Are they buying sight unseen? If not, it is more than likely due to the early super access cash passing the 6-month expiry date for the banks to stop caring where it came from.

      Up to 40K per household will leverage into a fair amount of debt at 95% LVR and these low, low rates.

      • VIC’s are easy to spot. Just look for the pasty complexion and the whine that comes when they open there mouth. Postcode 4877 price shift up about 50K also. R/E guys are happy as they have been offloading a lot of crap that has sat on the books for years. The locals here are laughing hard at the shit people are buying.

    • Jumping jack flash

      Unprecedented “COVID” stimulus!

      Check the stats. The whole economy was on a slow but steady slide into the abyss. Once stable and robust businesses going belly up every month or couple of months. Rampant wage theft exposed every few months that is absolutely necessary for the remaining businesses to stay afloat. The debt wasn’t growing nearly fast enough for over 10 years, despite back to back interest rate cuts for the entire duration.

      Everyone was pacing around, wringing their hands and tearing at their sideburns about what they can do to fix it without it looking too much like a “fix”, because nothing is ever wrong with the masterpiece of economic engineering that is the New Economy.

      Fortunately, along comes COVID. Everything is cured, and nobody need be the wiser.

  2. “Thus, neutrally or positively geared properties are available outside of Sydney and Melbourne which should inevitably entice investors into these markets.”

    But what they are really mostly looking for is capital growth. Whether it is positively or negatively geared is mostly an afterthought to most.

    • Yep. Certainly, many investors are. Personally I reckon the regions are a little risky (prices too volatile) for most investors. For a second home (pandemic bolt-hole) sure. Like the panic buying in the supermarkets and online I reckon there was a fair bit of panic buying of homes in the regions too, meaning it could easily reverse when the fuss dies down.

  3. It’s only when humanity finally faces the looming disaster that is global heating, and takes panicked measures to stop it, that the global housing ponzi will unwind. Until then, Chinese accounting and MMT and ‘lower teh rates’ will see an inexorable expansion of debt and prices.

  4. run to the hillsMEMBER

    I’m soon vacating a one bedroom apartment in North Sydney and was paying $530 a week in rent however the going rate was until recently $550+ for such properties, I got a bit of a discount as I’ve rented the place for 12 years. They have the place advertised for $490 a week which is a pretty significant drop in rent, it’s also getting a coat of paint, shower retiling and new curtains. I bit the bullet recently and dropped 830K on an apartment here.

  5. Hang on a second.
    A couple of weeks ago Leith was recommending investors sell their investment properties as prices were going to collapse!
    I guess MB got that one wrong.

    Same with Fortesque (FMG), one of the greatest ASX stocks of all time.

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