Home Info Centre Investment Property Market Snapshot – October 2019
Investment Property Market Snapshot – October 2019
Insurance insights

Investment Property Market Snapshot – October 2019

30 Oct 2019 9 mins read

Your monthly guide to latest industry statistics and news impacting landlords and property professionals.

Asking rents mixed

In October, capital city asking rents for houses held steady at $544 p/w and declined 0.7 per cent to $435 p/w for units, according to SQM Research. Across the capitals: Canberra ($615 p/w houses / $462 p/w units); Sydney ($671 / $496); Darwin ($519 / $381); Brisbane ($462 / $379); Adelaide ($396/ $309); Hobart ($435 / $403); Melbourne ($527 / $411); and Perth ($443 / $336). Nationally, rents for houses were down 1.0 per cent to $442 p/w and down 2.0 per cent for units to $363 p/w.

Vacancies decline 

SQM Research showed the national vacancy rate declined marginally to 2.1 per cent in September. The total number of vacancies Australia-wide was 71,404. Vacancy rates decreased 0.2 per cent in Sydney (3.2 per cent), Brisbane (2.3 per cent), Perth (2.7 per cent) and Canberra (1.0 per cent). Adelaide recorded a 0.1 per cent fall (0.9 per cent). Melbourne’s vacancy rate held steady at 2.0 per cent, Hobart’s at 0.6 per cent and Darwin’s at 2.9 per cent.

Housing values up

There was a 0.9 per cent month-on-month lift in national housing values in September (1.1 per cent combined capitals, 0.1 per cent combined regionals), according to CoreLogic’s housing market update for October. The September gains were driven by stronger conditions in Sydney and Melbourne where dwelling values increased 1.7 per cent over the month. Brisbane (0.1 per cent) and Canberra (1.0 per cent) were the only other capitals to record a rise in dwelling values over the month, while conditions held firm in Adelaide. In contrast, values were down in Hobart (-0.4 per cent) and continued falling in Perth 
(-0.8 per cent) and Darwin (-0.2 per cent).

Investors return to market

According to CoreLogic, the value of investor loans has recorded a sharp rise since June, rising a cumulative 11.6 per cent over the three months ending August 2019 – the fastest rate of growth since November 2016. The return of investors to the market was bolstered by housing market conditions turning a corner: values rose across five of the eight capital cities over the September quarter; prospects for capital gains improved; credit policies loosened and lenders are becoming more competitive for investment borrowers; and the spread between mortgage rates and rental yields has narrowed with the average interest rate on a 3-year fixed mortgage product for investors 3.8 per cent in September which was only one basis point higher than the combined capital city gross rental yield of 3.7 per cent. 

Every state and territory saw a lift in the value of investment loans, with the largest rise over the three months ending August in Victoria and Queensland, where the value of investment home loan commitments was up 19.1 per cent. Proportionally, investment activity is most concentrated in NSW where investors comprise 31.2 per cent of mortgage demand, followed by Victoria (26.4 per cent), the ACT (26.0 per cent), the NT (24.0 per cent), Tasmania (23.5 per cent), SA (22.1 per cent), Queensland (19.6 per cent) and WA (15.4 per cent).

Investor lending up

ABS’ Lending to Households and Businesses data for August 2019 showed new lending commitments for investment dwellings rose 5.7 per cent (seasonally adjusted) to $4,884 million. Refinancing of investment dwellings was also up 6.1 per cent.

Capital city clearance rates highest since 2017

According to CoreLogic’s September Quarter Auction Market Summary, the combined capital city clearance rates came in at 69.9 per cent (16,730 auctions) – the strongest quarterly clearance rate since June 2017 (when it was 71.7 per cent)

RBA tips housing supply shortfall

The RBA’s deputy governor has said a shortfall in housing supply was “quite likely” in the foreseeable future and that would trigger a “larger prices response” in property values. Dr Debelle said demand for housing would continue to grow and 2020 could be the year construction bottoms out: “While the increase in supply has finally met the earlier increase in demand, demand will continue to grow given population growth but supply is going to decline. So there is quite likely to be a shortfall again in the foreseeable future.”

Investors more confident

For the first time in 18 months, investors are now optimistic about house price growth, according to the latest ANZ/Property Council Survey. Emerging signs of recovery are fuelling the investors’ positive sentiments – auction clearance rates have picked up sharply, prices have been rising strongly in Sydney and Melbourne for two months, and housing finance is starting to pick up. Interest rate cuts and regulatory easing have been key drivers of this turnaround, ANZ noted.

Bullish investors

Property investors are becoming increasingly bullish about the current market following a sustained period of recovery, according to PIPA’s national survey. It found 82 per cent of investors think it is now a good time to buy, up 5 per cent from 2018’s result. The survey also revealed 73 per cent of investors prefer metropolitan markets to regional locations, with only 8 per cent expressing the opinion that coastal locations are the most appealing place to buy and just 1 per cent saying mining towns were the most appealing places to buy. Brisbane remained the hottest spot according to property investors, with 44 per cent of investors believing it offers the best investment prospects. Melbourne came in second, with 27 per cent of investors believing it to be the best place to buy and just 14 per cent nominated Sydney as having the best prospects. 

60% of investors look to non-majors

According to a new study by PIPA, restricted access to investment lending has pushed many investors to consider using non-banks for loans. PIPA noted around three in five property investors are now likely to consider a non-major bank due to the difficulties of obtaining investment financing and the conclusion of the royal banking commission. In fact, over one in four investors had already secured a loan from non-major lenders over the past year. The top-cited reasons were cheaper interest rates and higher borrowing power. Around 27 per cent of investors said they would consider refinancing their loan for an interest rate that is 50 basis points lower.

ACT introduces RTA changes

On 1 November 2019, the ACT Government will implement amendments to the Residential Tenancies Act made in February. The new laws effectively cap rental increases at CPI; make it very hard to refuse a tenant with a pet; limit break lease penalties to just four weeks’ rent after six months of residency; require landlords to urgently fix a broken air conditioner; increase the notice period from four to eight weeks for landlords to terminate a periodic lease when the landlord or family member wants to move into the home; strengthens the way in which the ACT Administrative Tribunal can alter tenancy agreements in family violence situations; reduces the maximum rent payable in advance to two weeks; provides a right for a tenant to terminate their agreement if they are accepted for social housing or a residential aged care facility; streamlines the provision that allows a landlord to terminate a tenancy if the renter uses the property for an illegal activity; and creates a head of power for the introduction of minimum standards for rental properties.

WA passes furniture anchoring legislation

The WA State Government has passed a law to protect children from toppling furniture. The new laws allow renters to anchor furniture to wall to prevent death or injury. The Consumer Protection Legislation Amendment Bill 2018 amends the RTA and means landlords must allow tenants, who submit a request form, to attach furniture to a wall to prevent a child, or person with a disability, from being hurt or killed. Owners can only refuse the form request in very limited circumstances, such as when the home is heritage-listed or if the walls contain asbestos. Tenants who attach furniture to walls will have to repair the wall at the end of the tenancy agreement.

NSW land tax goes digital

Property owners in NSW can now opt to receive their future Notice of Assessment via email, lodge a return, request an exemption or make any changes to property details online. The new portal also allows users to view a summary of the assessment notice and account balance, use the online calculator to estimate the amount of land lax liability, and send documents to support an application or query. Users can also view their contact details, an online service history summary, and land holding and exemptions via the portal.  

ACCC announces inquiry into home loans

On 14 October, the government announced the ACCC will be conducting an inquiry into home loan pricing – investigating how lenders set their rates, why they often fail to pass through RBA rate cuts to borrowers in full, and the barriers that may be preventing consumers from switching to cheaper options on the market.

Westpac raises LVR

Effective 22 October, the maximum loan-to-value ratio for interest-only investor loans was raised from 80 per cent to 90 per cent. The update applies to new purchases, refinances with the Westpac Group (Westpac, BankSA, Bank of Melbourne and St George Bank), and loan variations such as switching from P&I repayment to IO.

NAB provide $2bn for affordable housing

NAB has made a $2 billion commitment to help NFP organisations fund affordable housing projects and solutions across Australia. The bank will focus on providing funding and financing services for NFPs that build affordable and specialist housing including crisis accommodation, community housing, disability housing, build-to-rent properties and sustainable developments. 

‘Revolutionary’ rental complex opens in Perth

A complex in Subiaco – the first of its kind in Australia – has been built specifically as a rental complex so tenants do not face the prospect of being evicted when the landlord decides to sell. The 90 apartments also have around-the-clock on-site maintenance so tenants do not have to wait for repairs and there is a focus on community with regular free events.

Tech watch: latest apps and tools

Domain is partnering with RateMyAgent to showcase recommendations from the real estate agent reviews and rating website across participating agents’ and agencies’ profiles.

realestate.com.au is introducing two-factor authentication to 1from as part of the log-in process to help better protect tenant data.

Main photo by Tom Rumble on Unsplash

*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 961 017 if you have any questions. 

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