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

03 May 2022 12 mins read

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

1. The rental market 

In April, capital city asking rents for houses rose +1.4% to $638 p/w and +2.2% for units to $457 p/w, according to SQM Research. Across the capitals: Canberra ($765 p/w houses / $560 p/w units), Sydney ($787 / $503), Darwin ($648 / $460), Brisbane ($591 / $416), Adelaide ($505 / $363), Hobart ($519 / $450), Melbourne ($549 / $408) and Perth ($581 / $432).

SQM Research showed national vacancy rates declined -0.2% to 1.0% in March. A total of 36,868 residential properties were vacant Australia-wide over the month. Rates held steady in Canberra (at 0.5%) and Hobart (at 0.3%). A -0.2% decline was recorded in Brisbane (to 0.7%) and Darwin (to 0.5%), while Perth (at 0.5%) and Adelaide (at 0.3%) saw a -0.1% decline. Both Sydney (at 1.6%) and Melbourne (at 1.9%) recorded a fall of -0.4% in vacancy rates over the month.  

According to CoreLogic’s Hedonic Home Value Index, the average gross rental yield for capital city dwellings in March was 3.0%, while the combined regional dwelling yield was 4.1% – bringing the national gross yield to 3.2%. Gross rental yields across the capitals: Sydney (2.5%), Melbourne (2.8%), Brisbane (3.5%), Adelaide (3.8%), Perth (4.3%), Hobart (3.7%), Darwin (6.0%) and Canberra (3.8%). Gross rental yields across the regionals: NSW (3.6%), Victoria (3.5%), Queensland (4.3%), SA (5.0%), WA (6.1%), Tasmania (4.1%) and the NT (7.0%).

Corelogic’s Quarterly Rental Review showed rental growth was up (to +2.6%) in the March quarter, compared to the December 2021 quarter (at +1.9%). Regional rents increased by +2.9% over the March quarter, while capital city rents rose by +2.5%. The rate of unit rent growth over the March quarter was +3.0%, while house rents grew +2.4%. Capital city unit rents outperformed capital city houses over the first quarter, rising +3.1% and +2.2% respectively. Regional house rents outperformed regional units, recording a +2.9% quarterly rise, compared to a +2.8% rise in regional unit rents.

The most expensive and most affordable suburbs in which to rent in each capital city were also identified in the Review. In Sydney the most expensive houses were in Vaucluse and the most expensive units were in Point Piper, while the most affordable houses were in Tregear and the most affordable units were in Cabramatta. In Melbourne, Brighton houses and Brighton East units were most expensive, while Melton houses and Melton South units were the most affordable. Houses in Ascot and units in Kenmore were Brisbane’s most expensive, and Toogoolawah houses and Logan Central units were the most affordable. Adelaide’s Glenelg had the most expensive houses and Kent Town the most expensive units, while Elizabeth North had the most affordable houses and Salisbury the units. Houses in Dalkeith and units in North Fremantle were Perth’s most expensive rentals, while Midvale had the cheapest houses and Orelia the cheapest units. Hobart’s Sandy Bay had the most expensive houses and Claremont the units, while Primrose Sands had the most affordable houses and Brighton East the units. Stuart Park and Bayview had Darwin’s most expensive rents for houses and units respectively, while Moulden had the cheapest houses and Bakewell the units. Canberra’s most expensive rents were found in Campbell for houses and Forrest for units, while Charnwood had the most affordable houses and Hawker the most affordable units.

The Review noted gross rental yields increased over the quarter (3.23%). Gross yields for the combined capitals was 2.99% and 4.05% for the combined regionals. Darwin (6.04%) continued to record the highest rental yield amongst the capitals, followed by Perth (4.34%) and Canberra (3.82%). At the other end of the spectrum, the Sydney (2.48%) and Melbourne (2.81%) markets declined sharply. The national gross rental yield for housing in the March quarter was 3.1, with combined regionals at 4.0 and combined capitals at 2.8%. Across the capitals: Canberra (3.5%), Darwin (5.6%), Hobart (3.6%), Perth (4.2%), Adelaide (3.6%), Brisbane (3.3%), Melbourne (2.5%) and Sydney (2.2%). The national gross rental yield for units in the Mach quarter was 3.7%, with combined regionals at 4.5% and combined capitals at 3.6%. Across the capitals: Canberra (4.8%), Darwin (6.7%), Hobart (4.1%), Perth (5.5%), Adelaide (4.9%), Brisbane (4.7%), Melbourne (3.6%) and Sydney (3.1%).

According to Domain’s Quarterly Rent Report, house rents hit a record median high of $508 p/w across Australia’s capital cities in the March quarter. The rise in rent prices (+1.8%) was due to house rental prices increasing in Melbourne (+1.1% to $450 per week), Brisbane (+4.2% to $500), Adelaide (+3.3% to $465), Darwin (+1.7% to $610) and Perth (+4.3% to $480) – with Sydney (0.0% at $600) the only capital to not see gains over the March quarter. Canberra remained the most expensive capital city rental market across Australia – with an average asking rent price for houses of $700 (+3.7%). The pace of quarterly growth in the unit sector doubled from the December 2021 quarter to the March quarter, with unit rents sitting at $448 per week. Adelaide saw the greatest rate of growth for unit asking prices over the quarter to reach $380 (+5.6%), followed by Hobart at $450 per week (+4.7%). Sydney (+21.0% to $500), Melbourne (+4.0% to $390), Perth (+2.6% to $400), Darwin (+4.2% to $500) and Brisbane (+2.4% to $430) all recorded unit price gains over the quarter.

Domain’s Vacancy Rate Report  identified the suburbs in each capital city with the highest and lowest vacancy rates. In Sydney, Rouse Hill–McGraths Hill and Ku-ring-gai (2.6%) had the highest vacancy rate, while Blue Mountains (0.2%) had the lowest. In Melbourne, Stonnington East (3.6%) had the highest and Yarra Ranges, Cardinia and Sunbury (0.4%) had the lowest. Brisbane/Gold Coast’s highest vacancies were in Jimboomba and Brisbane inner (1.5%) and the lowest in Strathpine, Southport and Gold Coast north (0.1%). In Perth, Cottesloe (1.0%) had the highest vacancy rate and Kalamunda, Armadale, Mundaring, Bayswater–Bassendean and Gosnells (0.3%) had the lowest. Adelaide City (1.0%) had the highest rate of vacancy while Playford, Onkaparinga, Marion, West Torrens and Tea Tree Gully (0.1%) had the lowest.

The PropTrack Rental Report March 2022 showed demand for rental properties had risen at near record levels nationally, climbing +37.1% YOY and was at an historic high across the combined capital cities for the month. Melbourne had seen the largest YOY increase in rental demand, up +59.6%, followed by Sydney (+52.2%), Brisbane (+32.2%) and Adelaide (+29%). The report also showed the number of properties available for rent in March fell -4.0% – the lowest level since August 2003. Capital city rental listings had fallen by -5.4% over the month and -26.9% YOY, while regional rental listings were +1.7% higher over the month and -10.1% lower YOY. Over March 2022, the number of new rental listings increased by +4.9% but YOY were -12.2% lower. Combined capital city new rental listings rose +3.2% in March 2022 but were -14.4% lower YOY. Regional new listings increased +11.0% over the month to be -4.2% lower YOY. Nationally, the median days on site for a rental property reached an historic low of 19 days in March 2022, compared to 23 days a year earlier.

PropTrack identified the regions with the largest YOY decreases in median weekly rent: Melbourne – inner units (-15%), Sydney – eastern suburbs houses (-9%), Sydney – city and inner south units (-8%), Sydney – eastern suburbs units (-8%), Sydney – Ryde units (-6%), Sydney – city and inner south houses (-6%), Sydney – inner west units (-6%), Melbourne – inner east units (-6%) Sydney – North Sydney and Hornsby units (5%), and Sydney – Parramatta units (-4%). 

Figures from Digital Finance Analytics revealed rental stress was 41.81% (or 2 million households) in March. NSW had the highest number of renters in stress (51.09%), followed by the ACT (48.04%), Tasmania (41.23%), Victoria (41.10%), Queensland (41.03%), SA (33.79%), WA (32.82%) and the NT (11.94%).

2. Housing trends

According to CoreLogic’s Hedonic Home Value Index, national housing values rose +0.7% in March to a median value of $738,975. All capital cities except Sydney (-0.2%) and Melbourne (-0.1%) recorded increases over the month: Canberra (+1.0%), Perth (+1.0%), Hobart (+0.3%), Brisbane (+2.0%), Adelaide (+1.9%) and Darwin (+0.8%). Prices in the regions outpaced the capital cities with a combined average price increase of +1.7%, compared with +0.3% for combined capitals. Increases were recorded across all regionals: WA (+0.6%), Tasmania (+0.8%), SA (+2.8%), Queensland (+2.0%), Victoria (+0.9%) and NSW (+1.8%).

National residential property listings increased +1.8% in March to 218,398, according to SQM Research. Listings rose in every capital city: Sydney (+3.0%), Canberra (+1.7%), Brisbane (+2.8%), Adelaide (+1.9%), Melbourne (+3.5%), Perth (+1.3%), Darwin (+2.6%) and Hobart (+4.9%). The research also found capital city average asking prices rose +0.8% for houses (to $1,219,600) and fell -0.7% for units (to $597,300).

PropTrack’s Home Price Index showed national dwelling prices increased by +18% over the 12 months to March. Prices rose +16% in the capital cities and +25% in regional areas. Sydney prices increased +16%, with the rest of NSW up +27%. Melbourne prices rose +10%, with the rest of Victoria up +22%. Brisbane rose +27% and the rest of Queensland +25%. Adelaide process were up +25% and the rest of SA up +19%. Perth prices rose +8%, with the rest of WA up +12%. Both Hobart and the rest of Tasmania recorded a +24% increase. Darwin prices rose +9%, with the rest of the NT up +3%. Prices were +26% higher in the ACT over the year.

CoreLogic’s interactive Mapping the Market tool showed a quarterly decline in values across 23.6% of suburbs, the majority of them in Sydney and Melbourne. In Sydney, 38.6% of properties recorded a decline in value, while in Melbourne 46.8% recorded a fall. In Canberra, 5.2% of properties recorded a decline in value, in Perth it was 13.4% and in Darwin 18.0%. In Brisbane and Adelaide, no houses recorded a decline in value, while minor falls in unit markets meant that less than 1.0% of markets in these cities saw a quarterly decline.

3. Building

The number of building approvals nationwide rose +43.5% in February to 18,675 (seasonally adjusted), according to the ABS. Approvals for private sector dwellings excluding houses rose +78.3%, while approvals for private sector houses rose +16.5%. The value of residential building approved rose +38.7%.

The HIA noted that, in seasonally adjusted terms, total residential building approvals decreased in the March quarter compared to the previous quarter in WA (-20.8%), Queensland (-9.4%), SA (-3.6%) and NSW (-0.1%), while increasing in Victoria (+1.0%). In original terms, approvals increased in the NT (+18.7%) and the ACT (+8.1%), and decreased in Tasmania (-3.7%). 

According to CoreLogic’s Cordell Construction Cost Index for Q1 2022, national residential construction costs increased 9% over the 12 months to March 2022 – the highest annual growth rate on record outside of the introduction of the GST.

4. Investment market

According to statistics from the ABS, the value of new loan commitments for investor housing fell -1.8% (seasonally adjusted) to $10.75 billion in February. The ABS noted: “This was the first fall in investor lending since October 2020. The fall in investor loan commitments was driven mostly by New South Wales (down 5.5%), Queensland (down 2.6%) and the Australian Capital Territory (down 11.9%). Victoria was flat while Western Australia rose 6.8% and Tasmania rose 2.8%.”

Ray White Group Chief Economist, Nerida Conisbee noted investor lending had continued to rise and was at an all-time high on a national level. While the most investment activity was focused on Sydney and Queensland, investors were also targeting the smaller markets around the country. “The locations where investors are buying the most are Sydney ($2 billion over the past 12 months), followed by regional Queensland ($1.7 billion),” Ms Conisbee said. “The areas where we are seeing the biggest increases are Darwin, regional Tasmania and regional Western Australia.”

In March, 25.63% 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. The ACT (35.80%) had the highest number of stressed investors, followed by NSW (32.44%), Queensland (24.42%), Tasmania (23.65%), Victoria (23.31%), WA (23.30%), SA (20.23%) and the NT (13.29%).

5. Finance matters

The RBA kept the official interest rate at the historic low of 0.1% at its board meeting on 5 April. The Board noted: “Financial conditions in Australia continue to be highly accommodative. Interest rates remain at a very low level, although fixed mortgage rates for new loans have risen recently. Housing prices have risen strongly over the past year, although some housing markets have eased recently. With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers.”

According to the RBA’s twice-yearly Financial Stability Review, Australian mortgage borrowers are in a much better position to deal with rising interest rates than they were before the pandemic. The RBA estimated that only around 5% of loans now have an outstanding LVR greater than 75%, compared to almost a quarter at the beginning of 2020. This means that for 95% of borrowers, it would take more than a 25% drop in home prices to send them into negative equity. RBA modelling estimated housing prices may fall 15% if interest rates rise 2%.

The ANZ and NAB were among the lenders to increase investor loan fixed rates ahead of the RBA announcement, according to savings.com.au

6. Latest research

CoreLogic’s Quarterly Auction Market Review showed 23,748 homes went under the hammer in the first three months of 2022 – making it the busiest March quarter since their records began in 2008. For comparison, there were 19,004 capital city homes taken to auction in the first quarter of 2021 and 18,902 over the March 2020 quarter.

IbisWorld predicted property prices will fall -5.2% in 2022-23.

According to InvestorKit’s Market Pressure Review Report, the 10 best-performing and fast-recovering local economies touting strong housing markets post-pandemic are: Greater Adelaide, Greater Hobart, Western Sydney, Townsville (Qld), Toowoomba (Qld), Bendigo (Vic), Shepparton (Vic), Geelong (Vic), Orange (NSW) and Wagga Wagga (NSW).

The Roaring Regions report from PRD Real Estate identified the top 10 affordable regional areas in the eastern states: Whitsunday (Qld), Toowoomba (Qld), Mackay (Qld), Upper Hunter (NSW), Wagga (NSW), Griffith (NSW), Northern Grampians (Vic), Wodonga (Vic), Greater Bendigo (Vic) and Central Highlands (Tas).

Domain identified the most affordable suburbs within five kilometres of five capital cities. Sydney: Erskineville, Newton, Redfern, Alexandria and Camperdown. Brisbane: Annerley, Spring Hill, Greenslopes, Kelvin Grove and Woolloongabba. Melbourne: North Melbourne, Collingwood, Abbotsford, Richmond and Fitzroy. Perth: Highgate, West Perth, Maylands, East Perth and Victoria Park. Adelaide: Richmond, Kurralta Park, Brompton, Brooklyn Park and Prospect.

There were just seven rentals across Australia – all share houses – that were affordable for a person on JobSeeker, according to Anglicare’s Rental Affordability Snapshot 2022. The research found 720 rentals (2%) were affordable for a person earning a full-time minimum wage, 312 rentals (1%) were affordable for a person on the Age Pension, 51 rentals (0%) were affordable for a person on the Disability Support Pension, seven rentals (0%), all share houses, were affordable for a person on JobSeeker, and one share house (0%) was affordable for a person on Youth Allowance.

A survey by Canstar found 56% of respondents were worried they will be unable to afford household bills amid skyrocketing living costs, while an additional 12% are unsure. When asked about the household bills they are most concerned about, 29% said their biggest worry was housing costs including rent or mortgage repayments. Petrol costs (22%) was second, followed by groceries (21%).

According to the NAB Residential Property Index, sentiment remained steady at +58 points in the first quarter of 2022, down just one point from the final quarter of 2021, boosted by solid rents even as house price growth softened. The survey found sentiment was highest in Western Australia and the Northern Territory, while softest in Victoria.

The Index also showed a sharp rise in foreign buyer demand for new property during the first quarter of 2022. According to NAB, foreign buyers accounted for 7.9% of the demand for new property in Q1, a significant increase from 4.6% in Q4 2021.

CoreLogic's monthly Unit Market Update showed the annual performance gap between houses and units fell to 8.7% in March. At the national level, units recorded a +0.3% rise in values over March, in line with the growth rates recorded in January and February, resulting in a first quarter appreciation of +0.9%. This is equivalent to a $5,464 increase in median unit values through the quarter. National house values rose +0.8% in March and +2.8% over the three months to March.  The rise in house values through the quarter was equivalent to a rise of $21,690 in median values.

7. Technology insight

eXp’s Virbela announced the launch of a newly-designed metaverse campus that features native integration with Zoom and a more curated experience for users.  

8. COVID-19 impacts

According to the Australian Housing and Urban Research Institute’s Australia’s COVID-19 pandemic housing policy responses paper, once the emergency period ended nearly one-third of landlords had a tenant in arrears, a one-quarter of landlords increased the rent, and almost one in five terminated the tenancy. A survey of landlords found 22% were asked to vary the rent but declined, 14% reduced the rent, 10% deferred the rent, and 24% both reduced and deferred payments. 

Ray White Chief Economist Nerida Conisbee identified the locations that saw the greatest increase in populations over the course of the pandemic. Geelong topped the list with a population increase of 7,157 per year compared to the long-term average of 5,074. Hunter Valley (ex. Newcastle) was second (5,280 vs 3,639), followed by Latrobe–Gippsland (4,316 vs 2,968), Newcastle and Lake Macquarie (3,993 vs 2,721), Illawarra (3,173 vs 2,677), Capital Region (2,861 vs 2,205), Richmond–Tweed (2,523 vs 2,145), Ballarat (2,286 vs 1,908), Southern Highlands and Shoalhaven (2,192 vs 1,591) and Murray (1,270 vs 585).

9. On the radar

Consumer prices climbed +2.1% in the March quarter, taking the annual pace to +5.1%, according to figures from the ABS. The ABS noted: “The CPI recorded its largest quarterly and annual rises since the introduction of the goods and services tax.” New dwellings (+5.7%) were the biggest contributor to CPI growth in the March quarter, followed by automotive fuel (+11.0%) and tertiary education (+6.3%).

REIA was awarded a government innovation grant to develop a national real estate license exchange (Project RE-ID). 

According to Knight Frank’s Global Residential Cities Index for Q4 2021, six Australian capitals ranked among the top 20 cities in the world that experienced the greatest growth in residential prices. Hobart ranked 4th overall with a +33.7% increase in price over the 12-months. Canberra came in 7th with +30.7% growth, Darwin was 11th with +25.5%, Sydney was 13th with +25.4%, Adelaide was 15th with +24.8% and Brisbane was 18th with +22.1% price growth. Melbourne ranked 36th with +15.8% growth and Perth was 90th with +7.6%. Turkey’s Istanbul topped the list with +63.2% growth, while Malaysia’s Kuala Lumpur ranked last with -5.7% price growth. 

The average price for investment properties was found to be nearly $170,000 below the mean national property price. Analysis from BMT Tax Depreciation indicated the average value of investment properties in Australia was $751,800 during the December 2021 quarter. In comparison, the mean national property price was $920,100 during the same period, according to ABS figures.

According to Ray White Group Chief Economist Nerida Consibee, there were 11,000 fewer homes for sale in the March quarter compared to the same time last year. Buyers in Brisbane faced the biggest shortage of supply with 3,700 fewer properties for sale, followed by Sydney with 2,500 less.

PEXA’s Property Insights quarterly report found that property sale settlements across both the east coast and west coast of Australia from January to March were comparable to the record-breaking numbers seen for the same period in 2021. Queensland, NSW, Victoria and WA all recorded at least +20% growth in aggregate value when compared to the first quarter of 2021. 

RentRabbit.com.au identified the 20 affordable suburbs for renters within commuting distance of capital cities. The most affordable markets were for units rather than houses, with all suburbs having a median weekly rent of $340 or less and located within 35km of the CBD. Topping the list was Shoalwater (WA, 20km, $265), followed by Caulfield East (Vic, 14km, $285), Kingsville (Vic, 8km, $300), Gardenvale (Vic, 14km, $290), Brooklyn Park (SA, 6km, $310), Plympton (SA, 6km, $320), Camden Park (SA, 6km, $320), Glenelg North (SA, 11km, $325), Heatherton (Vic, 24km, $325), Wembley (WA, 0km, $330), Osborne Park (WA, 0km, $330), West Footscray (Vic, 8km, $330), Mosman Park (WA, 7km, $335), Roselands (NSW, 13km, $335), Altona Meadows (Vic, 14km, $335), Jolimont (WA, 0km, $340), Inglewood (WA, 0km, $340), Burpengary (Qld, 33km, $340), Travancore (Vic, 6km, $340) and Magill (SA, 10km, $340).  

Legal corner: A foreigner investor was fined $250,000 after he was found to have purchased multiple properties in outer Melbourne without being authorised to do so by the FIRB.

10. Government incentives and actions

The NSW Government announced a new $112 million Back Home grants scheme that will provide flood-impacted renters, landlords and homeowners with cash grants to help make their homes safe and habitable again by contributing towards the cost of replacing appliances, reconnecting utilities and making necessary repairs. Under the Back Home grant scheme, households that have been declared as damaged or destroyed and are unable to claim on insurance or natural disaster relief will be eligible for up to $20,000 cash grants. The program is available across the Hawkesbury, Ballina, Byron, Clarence Valley, Kyogle, Lismore, Richmond Valley and Tweed local government areas.

The Australian Government and NSW Government launched the Property Assessment and Demolition Program. The program offers free structural assessment and demolition of damaged property in flood-affected regions.

The Queensland Government launched the Tradies in Paradise Incentive Scheme. Through the scheme, up to $1,750 will be paid to the first 1,000 tradespeople (except those from NSW) who move to the state and work for eight weeks’ rebuilding communities impacted by the floods.

The NSW Government also made the decision to change interstate building and construction licensing to make it easier for tradespeople to work across borders. The Automatic Mutual Recognition Scheme will enable qualified tradespeople from all states and territories, apart from Queensland, to assist in community rebuilds following extreme weather events.

*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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