Rental crisis continues despite increasing investor activity

The number of property investors active in the market in March increased by 2.9 per cent over the month, according to the Australian Bureau of Statistics Lending Indicators for March.

However, even with investor activity now at historical averages, the rental crisis is not going to be remedied anytime soon, according to a leading national buyers’ agent.

Atlas Property Group director Lachlan Vidler said the latest data to March 2022 shows investors comprise 35.1 per cent of mortgage demand by value, up from a recent record low of 22.9 per cent in 2020, and similar to historical averages for the first time in many years.

“But there had been multiple years when investors had mostly been absent from the market,” Mr Vidler said.

“One only needs to consider that out of about 2.5 million rental properties in Australia – according to the last census – there were only about 37,000 vacant in March this year.

“To put this into perspective, there were nearly 90,000 vacant in December 2016, which was the most recent peak vacancy rate period, according to SQM Research.”

Mr Vidler said the current rental crisis was a number of years in the making, with lending restrictions on investors part of the reason, but also the potential axing of negative gearing prior to the last federal election.

“But one of the major reasons why our rental market is so severely undersupplied is also because a huge number of investors sold their properties to owner-occupiers last year,” he said.

“Their motivations for doing so were no doubt varied, but the potential risk of having to continue to provide accommodation for tenants during the pandemic, while receiving no rent in return, was likely a valid concern for many.

“Also, investors in markets that had seen little capital growth for years, such as parts of Queensland, South Australia and Western Australia, made the most of the extraordinary market conditions last year to offload their properties.”

There was a record volume of owner-occupier activity last year, while investors remained subdued, which fundamentally has reduced the supply of rental properties available for tenants to lease.

“With property prices softening in some locations, but rents increasing in most areas, investors are likely to continue to be active in the market, but there is long way to go before the rental crisis is going to improve,” Mr Vidler said.

“New investors need to be diligent in their property and area selections, because not every part of the nation makes a sound investment location over the medium- to long-term – regardless of the current upswing in weekly rents.”