10 insights into the investment property market

In recent news, is the end nigh for the rental boom?; affordability takes another dive; Melbourne becomes third cheapest capital; re-sale profits hit a high of $285k as more properties go on the market; one-third of suburbs are in the million-dollar club; rising costs and taxes are sparking an investor exodus; and talk of changes to negative gearing circulated again – and were quickly shot down, while Victoria’s short-stay tax plan came under fire.   

Each month we pull together 10 insights impacting the investment property market. Read on for this month’s instalment… 

1. Rental boom end looms. Rental growth slowed in every capital city market except Hobart in August, according to CoreLogic. The hedonic rent index was unchanged for a second consecutive month, and rent values declined in Sydney for a second consecutive month. Nationally, rent values were up 7.2% in the year to August – the lowest annual growth rate since May 2021. PropTrack also noted every major capital except Melbourne and Darwin saw rental prices flatlining, with rents not growing for two consecutive months.  

2. Rental affordability declines. REIA’s Housing Affordability Report revealed rental affordability declined in the June 2024 quarter. The proportion of income required to meet median rents increased 0.2% points over the quarter to 24.6%. The proportion of income required to meet rent in NSW was 27.7%, in Victoria 21.9%, in Queensland 23.0%, in SA 25.0%, in WA 23.6%, in Tasmania 25.9%, in the NT 25.0% and in the ACT 19.1%. Suburbtrends’ Rental Pain Index for September revealed that, nationally, 68% of suburbs were in a state of ongoing rental stress..  

3. Housing affordability plummets to lowest level in three decades. REIA’s Housing Affordability Report showed Australian households were spending 48.1% of the median family income on mortgage repayments in the June 2024 quarter. According to PropTrack’s Housing Affordability Index, housing affordability had deteriorated to its poorest level since records began. A median-income household earning around $112,000 could afford just 14% of homes sold in FY24 – down from 43% three years ago and the lowest share since records began in 1995. Finder’s Consumer Sentiment Tracker for August revealed the highest levels of mortgage stress since tracking began in 2019 – with 42% of homeowners reporting that they struggled to pay their home loan.

4. Adelaide and Perth outprice Melbourne. In August, the median dwelling value in Melbourne was overtaken by Adelaide and Perth, making Melbourne’s median the third lowest among the capital city markets, according to CoreLogic. Overall, national home values increased 0.5% in August – the 19th consecutive month of increase – but the pace of growth slowed.

5. Owners pocket a record median profit of $285,000 when re-selling. According to CoreLogic’s Pain & Gain Report, Australian property delivered a median nominal gain of $285,000 from re-sales in the June 2024 quarter – setting a record high for the series going back to the early '90s. The number of national residential property listings rose by 7.9% in August, with new listings (less than 30 days) surging 11.8%, according to data from SQM Research.

6. One in three suburbs now have a median price point over $1 million. Data from CoreLogic revealed 29.3% of the 4,772 suburbs analysed recorded a median value at or above $1 million in August – a record high. REIA’s Real Estate Facts for the June 2024 quarter showed there was a 1.5% increase in the price of houses, with the national median house price hitting $1,049,136.

7. Investor exodus. Holding costs and state taxes are causing an investor exodus, according to PIPA’s Investor Sentiment Survey. The survey showed at least 14% of investors had sold their rental property in the past 12 months. Property market sentiment dipped as investors reassessed preferences, according to API’s Property Sentiment Report. Property Update reported investors were exiting Melbourne and Syndey markets. Colliers’ Residential Customer Series Report noted that engaging investors was the key to solving the housing crisis.

8. Money matters. At its Board meeting on 24 September, the RBA decided to keep the official cash rate at 4.35%. CoreLogic said that the rate hold should be seen as a positive, while Elite Agent canvassed opinions from industry leaders. RBA noted more people could be forced to ‘sell their homes’, with data from S&P Global Ratings pinpointing 100 suburbs on a watchlist for reduced price sales. Figures from APRA showed mortgage arrears had risen over the June 2024 quarter to sit at $23.37 billion – representing 1.03% of all mortgages. The data also showed new lending was ‘well above’ pre-pandemic levels despite higher interest rates.

9. Rental reforms for NSW, WA and Queensland. NSW Government proposed rental reforms including easing restrictions on pet ownership for tenants, introducing a tool to compare rental prices using bond data, and ending ‘no grounds’ evictions. The reforms are set to be introduced into Parliament in October. WA Government introduced new regulations to govern short-term rentals. New minimum standards came into effect in Queensland on 1 September.

10. Making headlines. Victoria’s short-stay rental reforms (introduced into Parliament in August) which propose imposing a new levy or tax of 7.5% of the booking fee (including GST) on both short stay service platforms and others who offer direct bookings of short stay accommodation, faced opposition. In an open letter to hosts in the state, Airbnb described the draft legislation as a ‘disappointment’ and flagged major issues. Short Term Accommodation Association of Australia started a petition against the levy, raising four key concerns. REIV warned the move will have little impact on Victoria’s housing crisis while driving up costs for holidaymakers.  

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