Property investors are set to snap up homes and apartments across Australia in 2022, as interest rates remain low and rental vacancy rates continue to tighten.
But experts are forecasting it won’t all be smooth sailing, as future landlords face the uncertainty of both federal and state elections, with housing policies that are yet to be defined. They also face possible interest rate hikes, which are looming on the back of inflationary pressures.
While interest rates may not rise immediately, tighter lending rules introduced in 2021 have already made it tougher for investors to get a mortgage, Loan Market Mortgage Broker Daniel Koutsamanis said. But that hadn’t yet had a major impact on the number of people looking to invest.
Changes to loan rules, including the calculation of debt to income ratios, (the amount someone can borrow depending on their earnings), and of interest rate buffers that determine if a borrower can afford a mortgage if interest rates rise by 3 per cent, had seen the amount that could be borrowed fall by between 5 and 10 per cent.
“Budgets are coming down a little bit, but there hasn’t been a drastic change,” Mr Koutsamanis said. “There’s still a fairly decent amount of confidence, with clients wanting to invest. The sentiment is still pretty decent, pretty strong.”
That confidence follows a stellar year for investors, with the number of new loan commitments jumping by 89.6 per cent across the year to October 2021,Australian Bureau of Statistics figures showed.
There was $9.73 billion of new loan commitments for investment properties in October alone, the data showed, despite the hit to rental markets in both Sydney and Melbourne over the year.
Rents in Melbourne dropped significantly over 2021, making it one of the cheapest capital cities to find a rental property. Apartment rents dropped by 7.5 per cent across the year to September and house rents fell by 2.3 per cent, Domain figures show.
Sydney apartment rents fell by 2 per cent over the same period, while house rents rose as people looked for bigger properties during lockdown.
Both markets rely on overseas migration to help fill rentals, including international students who were kept out of the market because of the COVID-19 pandemic.
Unlike Sydney and Melbourne, Queensland saw an influx of new tenants and new buyers, moving away from lockdowns in both cities.
Mr Koutsamanis said some investors were still looking at buying in Queensland, where the vacancy rate has dropped below 1 per cent and is just 0.5 per cent on the Sunshine Coast, according to SQM Research.
A rise in tenant numbers is now predicted in Sydney and Melbourne as international borders reopen to overseas students, workers and tourists, providing opportunities for investors across the country, Sydney-based Aus Property managing director Lloyd Edge said.
“With the international borders reopening, there is opportunity for more growth, with students returning at the moment. I think the properties in the city might start to come back,” Mr Edge said.
Demand for Airbnbs could also return, offering investors a way back into the short-stay rental market, Mr Edge added.
While rents may improve slightly with borders reopening, they would stay lower until migration returns to normal levels and investors would need to think about the long term, keeping properties for at least 10 years, said Melbourne-based buyers agent Wendy Chamberlain.
“Over time, real estate is a forgiving investment, so investors do need to look to the long term. They need to buy assets that can weather the storm rather than be hard hit, like student accommodation.”
Ms Chamberlain said looking further out of the city, and in regional areas, where investors could buy a bigger property with their money would help attract tenants looking for more space.
“I think the market will tick along quite nicely through 2022, but I think prices will hold steady, we won’t have the type of boom we had this year.”
Outgoing Real Estate Institute of Australia president Adrian Kelly said a balance of supply and demand, with more homes coming up for sale across the country, should see more opportunities for investors open up.
The number of homes for sale was down between 20 per cent and 40 per cent depending on the city, with people holding off listing during the year because of lockdowns.
“What we’re hoping to see is the supply and demand start to become balanced,” Mr Kelly said.
“We’re hoping a lot of people who sat on their hands during the pandemic will list and that will free up houses for investors and first-home buyers.”
Article Source:www.domain.com.au
