Real estate market garners more attention from investors

With the combination of rental yields rising, a global sharemarket downturn and strong demand from tenants, the perfect storm is brewing for some investors to switch from the stock market to real estate.

In early 2021, investor share of new mortgages were at record-lows of about 23 percent. This figure has jumped to almost a one-third according to government analysis. The catalyst is speculated to be the rising interest rates forcing first home buyers out and the easing of tougher legislation on investors.

According to SQM Research, national vacancy rates fell by 20 basis points (below 1 percent) from February to March – the lowest in 16 years. This has resulted in landlords having all the pricing power in the rental market.

SQM research is showing rent in some capital cities have jumped by more than 20 percent in the past year. This comes off the back of rent cap removals and eviction controls as well as immigration rates increasing and easing of COVID-19 restrictions.

Over the next 18 months, Shane Oliver, chief economist for AMP Capital expects property prices to fall between 15 and 20 percent, as a result of the hike in interest rates, while others believe the downturn to be even bigger.

After its disastrous fall during the pandemic, apartment rental growth is expected to continue its remarkable recovery and continue to outpace houses, according to CoreLogic.

Source: Financial Review