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Locked down but not out: Investors stage 2021 market comeback

By George Hadgelias

If one thing is clear, it’s that it takes more a global pandemic to quell investor appetite for Australian real estate. After a brief hiatus in 2020, this year’s hot housing market, record low interest rates and robust rental yields have well and truly enticed property punters back into the fray.

A look at the data shows that demand from investors really kicked into gear from January this year. Since then, we’ve been witnessing both an increase in the volume of email enquiries from investors on, as well as growth in the investor share of new lending.

The latest ABS data puts investor lending at 29.1% of total new lending – a far cry from the 20-year low seen in May 2020.

The end of HomeBuilder and other state government initiatives, combined with the steadily increasing deposit hurdle that accompanies appreciating house prices means a key competitor to investors – first-home buyers – are faced with a mounting challenge to enter the market.

The investor lending rebound

Nationally the value of new loans to investors has almost doubled since this time last year, with the value of investor loans increasing in every state since the pandemic began.

n fact, it’s more than doubled in Western Australia, Northern Territory, Queensland and the ACT since March 2020.

It’s a different story in Victoria where investor lending has slightly dropped off in June and July this year. The restrictions on in-person property inspections may have swayed investor appetite when compared to NSW, where one-to-one inspections have maintained housing market activity.

Investor enquiries on have now increased by 90% over the past year to reach highest level since the beginning of 2019.

The combination of low borrowing costs, ongoing capital growth and attractive rental yields is clearly enticing investors back to the market.

So let’s look at where investors are have been most active, as well as how much they are spending.

Where are investors looking?

South East Queensland is currently a clear favourite for investors in 2021. In particular, Greater Brisbane, Darwin, and regional Queensland have all shown strong year-on-year increases.

Breaking it down further, Australia’s highest growth regions for investor enquiry include Logan, Moreton Bay, Ipswich and North Brisbane.

Looking specifically at enquiries for units, it seems investors have well and truly shaken off any reservations they may have had of a perceived oversupply in Brisbane.

North Brisbane investor email enquiries have increased more than 400% year-on-year, while south Brisbane and Brisbane’s inner city are also seeing strong annual growth of more than 200%.

When it comes to investors enquiring about houses, the growth has been in both Brisbane as well as coastal Queensland markets.

Enquiries are up the most in the Logan-Beaudesert, Moreton Bay south and Ipswich SA4 regions. Darwin and regional SA (Barossa – Yorke – mid north) have also recorded large increases in investor email enquiries.

Relative affordability and tight rental markets appear to be piquing investor interest in these areas. South East Queensland and Brisbane property remains relatively affordable compared to the other East coast capital cities and yield advantages over NSW and Victoria have seen many looking for opportunity in Queensland.

How much are investors spending?

The data suggests investors are having to dig deeper to account for price growth across the market, but they may also be capitalising on the boost to borrowing power afforded by lower interest rates.

At a national level the median price of unit listings enquired on by investors has steadily increased since 2019 – up 17% between January 2019 and August 2021. The median price of house listings investors enquire on has also steadily increased since 2019, jumping 12% over the same period.

Since March 2020, at the beginning of the pandemic, the median price of unit listings enquired on in the Northern Territory has seen the biggest increase of all the states and territories. Not surprisingly, new investor lending in NT has more than doubled, with investors responding to both high rental yields and price growth.

The sweet spot: Where rents are up and stock is down 

Rents have increased the most in regional WA, Perth, Darwin and regional South Australia.

This coincides with other data showing these regions have experienced a considerable decline in rental listings.

Regional WA, Darwin, regional South Australia and Perth have had the largest proportional decreases in rental listings in the past 12 months. Given the limited supply of rental properties in these regions, vacancy rates have collapsed and rents have risen more than 15% over the past year.

As well as a shortage of stock, these regions have benefited from increases in demand from mining investment and regional migration with from an influx of city slickers escaping lockdowns.

Vacancy rates have also declined considerably in Brisbane, hitting a multi-year low which is likely to generate continued upward pressure on rents. With investors looking at yields in excess of 5% for metro areas, offering a comparative advantage over other East coast capitals like Sydney and Melbourne.

Low numbers of available rentals and increased rental demand have garnered the attention of investors, with upward pressure on rents and prices, supporting the high volumes of enquiries.

Interstate migration and longer-term shifts

We’re witnessing clear northbound migration trends, with NSW and VIC residents escaping lockdowns and heading for the desirable lifestyles of the Sunshine State.

This may well be underpinning the strong investor demand being recorded in South East Queensland.

Given the easy commute and shift to fully remote or part time working from home combined with lifestyle perks, residents from NSW and VIC have been heading to Queensland at a record rate.

Interstate migration into Queensland through 2020 was almost double the decade average and more than 58,000 people have moved to Queensland, during the 6 months to March 2021.

Apart from the shift to the regions, which has predominantly seen inflows to regional NSW and QLD, Greater Brisbane has recorded the largest net flow of people into the capital city from March 2020 through to March 2021.

The COVID-induced city exodus has been well documented with Melbourne and Sydney recording large net losses of people in 2020. Brisbane, Perth and Canberra were the only capital cities to record net gains over 2020. In fact, Brisbane gained 0.52% of population while Sydney and Melbourne lost a similar percentage.

All told, investors may be considering where future buyers and tenants will want to live.

A continuation of remote working is likely to continue to benefit the Queensland market with an easy commute back to VIC and NSW capitals making a hybrid working environment favourable.

Many people have not only chosen to escape lockdowns but also seek relative affordability in Queensland. More sun, less traffic and the potential to upsize have all been cited as drivers of northbound flows.

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