The apartment market has traditionally been dominated by investors, first home buyers and downsizers. Over the last few years investors have been mostly absent from both “off the plan” and existing apartment sales however this is changing.
ABS reported an overall rise in residential property lending throughout 2021, with a slow down in the second half of the year except for investor lending (excluding refinancing) which continued to rise for all residential property types to finish up a staggering 86.9% year on year to Nov 21. (A$5.4B to A$10.1B). Over the last few years the apartment market has been dominated by owner occupiers, but anecdotally we have seen more investors enter the market in the first few weeks of 2022.
Unlike owner occupiers who are driven by the need for a home and make more emotive choices, investors are discretionary both in the time to enter or exit a market and between asset classes, with total financial return the primary motivator. Other investment options such as equities and houses have risen sharply recently and cash returns are virtually zero or even negative in real terms. For investors to buy apartments, they must now see them as the best option for them compared to other investments.
Perhaps investors share my optimism for a happy 2022, which if correct will see the return of travel, events, international students, and tourism which will in turn will be a boost for apartments, driving an increase in rent and greater return for apartment investors.