Are rising interest rates prompting investors to sell in Melbourne and Sydney?
Over the last few years there has been an uptick in landlords selling their investment properties, especially in Melbourne and Sydney.
Data from PropTrack reveals a notable increase compared to last year, painting an intriguing picture of the current market dynamics.
Investor sales on the rise
PropTrack reports that in Sydney, during the December quarter, investment property sales accounted for 35.2% of home sales, a significant leap from 28.3% in the same period in 2022, and marginally higher than 28.9% in 2021.
Melbourne mirrors this trend, with investor sales rising to 35.2% in the December quarter from 26.9% a year earlier and 27.9% in 2021.
Paul Ryan, a senior economist at PropTrack, notes that this sell-off aligns with a general surge in investor activity.
“We’re witnessing a net increase in investors in the market, despite some selling off their holdings,” he explains.
This trend is fuelled, in part, by the lure of rising rental yields, with national rents climbing by over 11% in the past year.
Ryan sheds light on why some investors might choose to exit.
“For long-term landlords, the combination of increased interest rates, substantial capital growth, and a plateauing growth outlook presents an opportune moment to liquidate,” he states.
However, he remains optimistic about investor conditions, expecting stable or potentially declining interest rates.
Local perspectives: Melbourne and Sydney
In Melbourne many property investors are disturbed by the “tall poppy syndrome” narrative that’s taken place over the last little while.
It puts property investors in the role of villains who are against the Australian dream of home ownership, and we believe this is an unfair and inaccurate portrayal.
At the same time they are frustrated by the government’s interference treating investors as an ATM every time they need more taxes, such as the increased land tax impost.
Some investors are frustrated by the new tenancy legislation favouring tenants and other investors are playing the waiting game with interest rates, hoping for a more favourable investment climate in the future,
The exception: Adelaide’s market resilience
Adelaide stands out as the exception to this trend.
Investor sales in Adelaide decreased slightly in the December quarter of 2023, contrasting with the broader trend.
PropTrack attributes this to Adelaide’s robust market performance since the pandemic, with home values surging and vacancy rates plummeting.
Looking ahead and a final note to investors
As we navigate through 2024, understanding these market shifts is crucial for investors.
With varying trends across cities and a complex interplay of factors influencing investor decisions, staying informed and agile will be key to navigating the property investment landscape in Australia.
As I always say, when it comes to property investment, the focus should be on investment-grade properties in A-grade locations.
Never follow a trend or buy in hotspots or growth areas because these won’t give you the long-term growth that you’re looking for.
I’m talking about areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.
