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Should investment owners sell or hold?

Should investment owners sell or hold?

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Here are some interesting recent market stats.

  • Rental rates for apartments nationally are up 4.8% year on year to June 2022.
  • Investment sellers nationally has grown from 7% of all sellers in 2013, to 25% in 2022 (and 29% in Melbourne).
  • Investment buyers nationally has fallen from 26% of all sellers in 2013 to 8% in 2022
  • Total rental listings are 27.7% below the national average.
  • The number of potential renters per available listing is up 32.8% year on year to June 2022.

These stats are courtesy of realeastate.com.au and were delivered in a recent market briefing by Cameron Kusher – Director of Economic Research with the REA Group,

What is the investment market doing?

I see two things going on here…

  • There has been a rush to the door by investment owners to exit the market. This is driven by lower total returns and a shift in most states legislation, to be increasingly favourable to renters. This was particularly the case during Covid in Melbourne and contributed to the collapse of 6 companies associated with CBD Developments
  • The second trend is rents are rising and are likely to keep doing so. There is already direct evidence of rental growth (4.8%) but more encouraging for investment owners, is the rising renter demand (renter per listing up 32.8%) and decreasing availability (total listings down 27.7).

Are investors selling too soon?

Given the tightening rental market and likely ongoing rise in rents, is the investor sell off a bit too soon?

In his briefing, Mr Kusher also touched on the increasing cost of construction materials. It is up 15.4% (excluding labour costs) since the same time last year. He suggested this will push buyers away from new builds and towards existing houses and apartments.

As the forecast resumption of migration to Australia gains momentum, the demand for rental accommodation will grow. Even interstate migration will drive rental demand. People almost always rent for a while before they buy after moving to a new city.

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