More than 5,000 investment properties were listed for sale over the last three months
New listings for investor-owned residential properties have nearly doubled since December, with many landlords looking to exit the market amid rapid interest rate rises.
More than 5,000 investment properties were listed for sale over the last three months, lifting the nationwide total to 10.542, according to new data from CoreLogic.
Investor-owned listings account for 28.9% of the new stock on the market, The Australian Financial Review reported. That’s up 1.9% from December.
CoreLogic research director Tim Lawless told AFR that the share of investor-owned listings was still lower than last year’s peak of 35% of all stock, but was higher than the long-term trend.
“There is likely to be a growing number of investors facing cash-flow challenges, which could be prompting a decision to sell,” Lawless said. “Although rental income has risen amid record-low vacancy rates in most areas, the rise in rents hasn’t been enough to offset the rise in mortgage repayments.”
Investor-owned listings spike
In Sydney, the volume of investor-owned listings has more than tripled to 2,030, AFR reported. Investor-owned listings now account for 33.8% of new listings in the city, the highest level since July 2022.
In Melbourne, investor-owned listings have more than doubled to 2,114, and in the ACT they have risen to 219. AFR reported. The other state capitals saw investor-owned listings increase between 41% and 80% over the same period.
Redom Syed, a mortgage broker at Confidence FInance, said that some landlords who owned multiple properties were struggling to meet their mortgage repayments.
“We’ve been getting sell calls from our investor clients since late last year, and last month alone, we probably had half a dozen landlords telling us they are looking to sell because they were having difficulty paying their owner-occupier mortgage while also repaying their investment loans,” Syed told AFR. “Most landlords are not desperate yet, but they are increasingly worried about their budgets, so they are looking to pay off some debts. Investors are not attached to their investment properties, so during a crunch, these assets are the first to go.”
Victor Kumaer, founder of buyer’s agency RIght Property Group, told AFR that new investors were likely to have the most trouble – especially if they hadn’t budgeted for the Reserve Bank’s 10 consecutive rate hikes.
“Investors who bought in the past three years when rates were at record lows and spent their savings renovating and buying new cars are likely to be most at risk of selling, if they have not saved enough buffer,” Kumar said. “I’m already starting to see some landlord distress. I’m also seeing anecdotal evidence that people are seriously thinking of selling, with agents telling me requests for appraisals have surged across the board.”
Fear of further rate hikes
The fear of further rate hikes could also be pushing investors to sell now before the market worsens, according to Destiny Financial Solutions founder Margaret Lomas.
“As it can take more than three months to sell a property, those investors feeling the pinch are afraid that if they wait to list their properties, there will be fewer buyers as the rates rise,” she told AFR. “So far, most investors have been able to hang in there. But it is the doubt around just how far the rate rises will go which is fuelling sales now.”
Read next: Rents won’t peak until 2024 – expert
Lawless said that despite skyrocketing rents, the impact of the RBA’s repeated rate hikes on mortgage costs would still leave most investors with a huge shortfall.
For example, rents in Sydney have risen 11.8% in the past 12 months, adding an extra $315 per month in rental income. However, over the same period, an investor with a $500,000 mortgage on the average variable rate would see their investor loan rise by about $835 per month – a deficit of $520.
“Investors with low debt levels would be in a prime position to benefit from higher rental returns, but the reality for a highly leveraged investor is the rise in the cost of debt is likely to be outweighing any additional income derived from higher rents,” Lawless told AFR. “Investors with multiple properties are likely to be more heavily geared. For those with high debt levels it’s reasonable to assume the rapid and significant rise in the cost of debt would be creating significant cash-flow challenges despite the strong rental conditions. [So] we could see a rise in motivated listings as more property owners find they can’t service their loan repayments.”
Have something to say about this story? Let us know in the comments below.
