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10 insights into the investment property market
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10 insights into the investment property market

31 Aug 2021 10 mins read

A guide to keep landlords and agents updated about what is happening in the investment property market…

1. The rental market 

In August, capital city asking rents increased 0.5% for houses to $578 p/w and held steady for units to $420 p/w, according to SQM Research. Across the capitals: Canberra ($725 p/w houses / $519 p/w units), Sydney ($698 / $465), Darwin ($611 / $463), Brisbane ($517 / $395), Adelaide ($448 / $335), Hobart ($485 / $419), Melbourne ($520 / $370) and Perth ($529 / $404).

National vacancy rates remained steady at 1.7% in July, according to SQM Research. A total of 61,313 residential properties were vacant Australia-wide over the month. Rates held steady in Brisbane (1.3%), Perth (0.9%) and Canberra (0.7%), while increases were recorded in Melbourne (+0.1% to 3.6%), Adelaide (+0.1% to 0.7%), Darwin (+0.2% to 0.6%) and Hobart (+0.1% to 0.5%). Sydney was the only capital to record a decrease in vacancies, falling -0.1% to 2.7%.

According to CoreLogic’s Hedonic Home Value Index, the average gross rental yield for capital city dwellings in July was 3.1%, while the combined regional dwelling yield was 4.5% – bringing the national gross yield to 3.4%. Gross rental yields across the capitals: Sydney (2.5%), Melbourne (2.8%), Brisbane (4.0%), Adelaide (4.2%), Perth (4.3%), Hobart (4.1%), Darwin (6.0%) and Canberra (4.1%).

Figures from Digital Finance Analytics revealed rental stress was 38.83% (or 1.944 million households) in July. NSW had the highest number of renters in stress (54.41%), followed by Victoria (40.22%), WA (33.80%), Queensland (32.86%), the ACT (30.64%), SA (23.70%), Tasmania (19.54%) and the NT (13.05%).

REIA noted that the capital city weighted average showed rents increased 0.1% in the June quarter. Sydney (-0.6%) and Melbourne (-0.5%) recorded falls while all other capitals recorded increases. Perth recorded the largest increase (+2.6%), followed by Darwin (+1.9%) and Hobart (+1.6%).

PRD’s Australia Economic and Property Report for 2021 showed Adelaide (0.7%), Perth (0.9%) and Canberra (0.9%) recorded below 1% vacancy rates in the March quarter of 2021, while Brisbane’s rate declined to 1.7%. Sydney (3.6%) and Melbourne (6.1%) saw vacancy rates increase. According to PRD’s data, Sydney’s annual median rent for a 3br house was $530 which was a 6.0% increase and 2br unit was $480 and -9.4%; Melbourne ($410, 0.0% / $400, -13.0%); Brisbane ($405, +3.8% / $410, +1.2%); Adelaide ($400, +6.7% / $390, +6.3%); Perth ($400, +14.3% / $390, +14.7%); Hobart ($470, +2.2% / $400, +1.3%); Darwin ($539, +17.4% / $364, +10.3%); and Canberra ($570, +6.5% / $520, +6.1%).

A survey by ME Bank found 68% of renters reported rent stress (rental payments of more than 30% of household disposable income). According to the survey, renters are spending 41% of their income on rent, on average – up 8% over the last six months to June 2021.

2. Housing trends

According to CoreLogic’s Hedonic Home Value Index, national housing values rose +1.6% in July to a median value of $656,694. All capital cities recorded increases over the month: Canberra (+2.6%), Darwin (+1.7%), Hobart (+1.7%), Brisbane (+2.0%), Adelaide (+1.7%), Perth (+0.3%), Sydney (+2.0%) and Melbourne (+1.3%).

National residential property listings increased +1.1% in July to 238,834, according to SQM Research. Listings rose in all capitals except Sydney (-5.1%) and Adelaide (-1.4%). The research also found capital city average asking prices fell -1.6% for houses (to $1,083,200) but rose +0.1% for units (to $572,700).

Domain’s House Price Report for the June quarter showed capital city house prices were up +5.8% over the quarter to a median of $955,927, while unit prices were up +2.1% to $601,482.

The report also revealed there were only eight regions that recorded annual price falls: Queensland – Outback; SA – Outback; Far West and Orana; Barossa – Yorke – Mid North; Logan – Beaudesert; Ipswich; Perth – Inner; and WA – Wheatbelt.

PRD’s Australia Economic and Property Report for 2021 showed city markets recorded an average of +7.6% median house price growth in the 12 months to the first half of 2021 – up from the +1% average recorded in the 12 months to the first half of 2020. Non-capital metro markets recorded an average +10.4% growth in the 12 months to the first half of 2021 – up from +2.7% in the 12 months to the first half of 2020. Regional markets recorded an average of +12.7% median house price growth in the 12 months to the first half of 2021, outpacing all other markets.

CoreLogic estimates there were around 171,100 sales in the three months to July – up +53.4% on what has typically been seen at that time of year for the previous five years. In the same period, there were just 121,200 newly advertised properties for sale in the three months to July – taking the ‘sales to new listings ratio’ to 1.4 over the three months to July.

HIA’s New Home Sales Report showed new home sales fell -20.5% in July, with declines seen in almost every state. Sales declined -32.2% in Victoria, -29.4% in SA, -25.4% in Queensland and -14.8% in NSW. WA was the only state to see an increase in new home sales for the month of July, up by +8.5%.

3. Building

The number of building approvals nationwide fell -6.7% in June to 18,911 (seasonally adjusted), according to the ABS. Approvals for private sector dwellings excluding houses rose +0.8%, while approvals for private sector houses fell -11.8%. The value of residential building approved fell -2.3%.

Residential construction costs increased +1.4% in the three months to June 2021, outpacing the Consumer Price Index of 0.8% for the same period, according to CoreLogic.

HIA noted value of construction work for detached houses surged in the June 2021 quarter to reach the highest level on record. According to ABS figures, the estimate for total construction work done rose +0.8% to $52,875.5 million (seasonally adjusted) in the June quarter.

4. Investment market

According to statistics from the ABS, the value of new loan commitments for investor housing rose +0.7% (seasonally adjusted) to $9.19 billion in June.

In July, 25.06% of all investors were stressed (i.e. income from rent is not sufficient to recover the costs of owning and letting their properties), according to figures from Digital Finance Analytics. NSW (34.22%) had the highest number of stressed investors, followed by the ACT (32.90%), WA (24.02%), Victoria (23.60%), Queensland (22.33%), SA (16.92%), the NT (15.92%) and Tasmania (12.56%).

Data from MyHousingMarket showed property investment return remained high in July. Total annual return: Sydney (28.20% for houses / 13.4% for units), Melbourne (19.84% / 11.3%), Brisbane (20.95% / 14.7%), Adelaide (21.17% / 14.0%), and Perth (17.53% / 16.1%).

According to REA, the top regions per state based on the number of new investors in the period between October 2020 and March 2021 were Sydney Inner, Gosford and Newcastle in NSW; Geelong, Wyndham and Ballarat in Victoria; Toowoomba, Broadbeach-Burleigh and Caloundra in Queensland; Charles Stuart, Onkaparinga and Playford in SA; Launceston, Hobart Inner and Hobart North West in Tasmania; and Stirling, Perth City and Cottesloe in WA.

5. Finance matters

The RBA kept the official interest rate at the historic low of 0.1% at its board meeting on 6 July. The Board noted: “Housing markets have continued to strengthen, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, including first-home buyers. There has also been increased borrowing by investors. Given the environment of rising housing prices and low interest rates, the Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

According to a report from PEXA, non-major lenders in NSW, Queensland, Victoria and WA continued to grow their share of the new mortgage market in July.

6. Latest research


According to REIA’s Housing Affordability Report: the past 20 years, housing affordability declined, with the proportion of income required to service a loan increasing from 27.2% in 2001 to 35.7% in 2021. In contrast, rental affordability only declined marginally (0.9%), from 22.1% in 2001 to 23.0% in 2021.

HIA’s Affordability Index revealed a decline across all states and territories over the past year. Hobart recorded the largest decline at -18.7%, followed by Darwin (-13.0%), Canberra (-10.2%), Adelaide (-8.7%), Brisbane (-6.3%), Perth (-5.5%), Melbourne (-3.8%) and Sydney (-3.3%). Across the regions, regional NSW recorded the largest decline in affordability at
-22.8%, followed by regional Tasmanian (-13.6%), regional Queensland (-10.3%), regional NT (-8.6%), regional SA (-8.1%), regional Victoria (-6.5%) and regional WA (-0.6%).

According to the quarterly Well Home Loans Green Shoots Report, the 20 suburbs in Australia that are showing the clearest signs of price growth in the near future are Mount Johns (NT, Oxley park (NSW), Rainbow Beach (Qld), Elermore Vale (NSW), Glenelg (SA), Hackham (SA), Rockingham (WA), Madeley (WA),  North haven (SA), Hope Island (Qld), Pooraka (SA), Modbury North (SA), Wynnum (Qld), Florey (ACT), Carrum Downs (Vic), Seville Grove (WA), Werribee (Vic), St Marys (NSW), Carlton (Tas) and Sandringham (Vic).​

According to Knight Frank, Sydney’s luxury home market will be world’s strongest prime property market in 2021 with 10% price growth forecast. In 2022, Sydney will share the global prime top spot with London, with 7% price growth expected.

Properties in a third of suburbs have outpaced annual wages in property price growth, according to data from Domain. According to the report, 95% of Australian suburbs have clocked annual gains in house prices over the year to June 2021. Of these suburbs, 33% recorded gains that were more than the annual household income. For units, 67% of the suburbs analysed recorded an annual increase in price, but only 10% of those suburbs had growth higher than the annual household income.

Realtor.com survey found 66% of all consumers would consider living in a 3D-printed home, with 75% of millennials ready to consider the change. Affordability, energy efficiency and resistance to natural disasters were cited by respondents as major benefits. The survey also found that 30% of all respondents and 43% of millennials think that 3D-printed homes will replace traditional methods of homebuilding.

7. Technology insight

Managed App partnered with FLK It Over to offer agencies a program that streamlines the manual real estate forms process.

Sorted Services launched the ‘Sorted Trades & Maintenance’ solution which provides tools for renters, homeowners, agents, and tradespeople to simply and efficiently lodge and manage maintenance requests and track the job status throughout the process.

REIV and digital partner Hutly launched an enhancement to the member-only VicForms platform that enables digital signatures.

AI-powered fintech Effi partnered with finance comparison website Finty to match consumers seeking property loans with mortgage brokers.

CoreLogic’s listing portal and property research platform onthehouse.com.au partnered with proptech company Openn Negotiation to launch a technical integration connecting listing platform visitors with live property auctions.

8. COVID-19 impacts

The NSW Government opened applications for COVID-19 residential tenancy support payments for landlords who have lowered rent for lock-down impacted tenants. The payment is capped at the rent reduction passed onto the tenants, or $1,500, whichever is the lower. Only rent waived from 14 July 2021 is eligible to be claimed as a payment. A landlord can claim either this payment or the COVID-19 land tax benefit (which is an offset of the land tax liability equal to the rent reduction granted), but not both. Landlords can make separate claims for each rental property they own.

In accordance with the NSW Government’s new regional permit system, as of 21 August investors are not permitted to inspect property in regional NSW for the duration of the Greater Sydney lockdown.

According to the Finder RBA Cash Rate Survey, 63% of the experts surveyed said they thought the COVID-19 lockdowns could see Australia enter another recession. 

Figures quoted by the HIA showed more than 32,000 residents departed Melbourne for other parts of the country in the year to March, while 31,600 residents left Sydney. 

According to Juwai IQI, 75% of global city property markets have benefited from COVID-19. Of the 21 global cities examined, 17 had significant positive changes in prices during the first year to 18 months of the pandemic, with an additional three showing minimal growth at less than 1% year-on-year. Sydney (+12%), Perth (+9.7%), Brisbane (+8.2%) and Melbourne (+6.1%) all reported positive price growth through the pandemic.

9. On the radar

REIA called on governments to introduce strategies in a bid to protect property managers ‘on the job’ as well as support those dealing with domestic violence. According to a REIA survey, 57% of property managers have experienced domestic violence in tenancies in the past 12 months and 30% said they dealt with domestic violence in tenancies two to three times a year.

According to a report by the FIRB, Singapore is the largest foreign investor (17%) in the Australian property market. Singaporean investors have acquired $19.3 billion in local real estate over the past two years, overtaking China ($13.2 billion) as the number one source of foreign real estate investment.

REIWA launched its Accreditation Program to help Western Australians easily identify agents who are specialists in their field and improve the standards of excellence within the WA real estate industry.

The Westpac Quarterly Housing Pulse showed the ‘time to buy a dwelling’ index dropped a further 14.1% over the three months to August to sit at the second-lowest point since 2010. 

ANZ lifted its property price growth forecast for 2021. The bank now expects house prices to jump by another 20% this year and rise 7% in 2022.  

According to the Economist Intelligence Unit’s Safe Cities Index 2021, Sydney is the world’s 4th safest city (up from 5th in 2019) and Melbourne is the 8th (up from 10th). Copenhagen took out the top spot.

Knight Frank’s Global Buyer Survey 2021 revealed 19% of respondents had moved house since the start of the pandemic – rising to 25% for  Australasia. Respondents said their biggest drivers for moving included more outdoor space (22%) and more indoor space (19%). A further 20% were considering moving in 2021, with 38% looking at city locations and 33% preferring suburbs. Some 46% were looking at detached houses, waterfront residences or villas; 34% looking at country estates; and 31% considering apartments (up 19% from 2020).

A survey by Finder revealed one in 20 (5%) people with a home loan would require financial assistance if their home loan rate increase out of cycle.

10. Government incentives and actions

The ACT Government is consulting on four proposed revisions to the Residential Tenancies Act 1997 that would provide tenants with more rights and protection. Public consultation is open until 17 September 2021.

Following changes to the New South Wales Strata Schemes Management Act 2015, new regulations came into effect on 25 August 2021 which overturn “blanket bans” on pets in strata properties. There is now only a limited list of reasons where an owners’ corporation can refuse a lot owner keeping an animal in a strata scheme or take steps to remove an existing animal from the scheme. According to the NSW State Government, these circumstances include repeated damage of the common property, menacing behaviour, persistent noise and odour.

The Commonwealth Parliament announced an inquiry into housing affordability. The inquiry will examine the falling levels of home ownership and what actions the government can take to address the issue. Public comment is open until 13 September 2021.

The ATO reminded property investors to look out for common tax return mistakes that can delay refunds or lead to an audit. Assistant Commissioner Tim Loh said that the most common mistake rental property and holiday homeowners make is neglecting to declare all their income, and this includes failing to declare any capital gains from selling an investment property. To help property investors with their returns, the ATO released a toolkit for property investors, Rental properties 2021: how to treat rental income and expenses, Guide to capital gains tax 2021: how to calculate your CGT obligations, a complete rental property video series and a podcast on Getting ready for Tax Time 2021.

The Commonwealth Government passed The Treasury Laws Amendment (2021 Measures No.1) Bill 2021 enabling companies to sign and execute documents, hold meetings, provide notices relating to meetings and keep minutes using electronic means or other alternative technologies until 31 March 2022.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions. 

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