Last month, the Australian’s James Kirby reported that investors are rushing back into Australian property after “running for the hills” earlier in 2023:
“As investors sat on the sidelines through most of the year, successive monthly reports show prices and rents rising relentlessly. Sooner or later investors were going to move and in the last few months the pendulum swung”.
“As CBA economics team has put it: “Demand from investors has outstripped that of owner-occupiers during the current upswing.”
“Emboldened too by an expanding consensus that interest rates have peaked, investors are hunting nationwide”.
The rebound is apparent in the Australian Bureau of Statistics (ABS) mortgage origination data, which shows that the value of new mortgages taken out by investors had rebounded to around the level of the 2015 and 2017 peaks (albeit still well down from 2022 all-time high):
Justin Fabo posted the below chart at Antipodean Macro showing that Google searches for “investment property” has surged, which Fabo says may have “something to do with all that income tax being paid plus rising housing values again”:
Fabo makes a good point. The share of income tax being paid by Australian households soared to a near all-time high 17.2% of gross income in the September quarter of 2023, as illustrated by the below chart from Alex Joiner at IFM Investors:
No doubt, the strong growth in rents and near record low vacancy rates are also enticing investors into the market:
The medium-term outlook for property investors is also positive with the Reserve Bank of Australia (RBA) expected to cut interest rates either in the second half of this year (my prediction) or early next, which should spur house prices.
Australia is also facing the prospect of further tightening in the rental market given population growth via immigration is expected to far exceed the construction of new homes.
Therefore, expect investor appetite to strengthen further in 2024 as Australians seek shelter from their income tax bills (via negative gearing), rental growth remains strong, and anticipation of rate cuts grows.
