Investors Flock Back to Australian Property Market

Recent lending data reveals a significant resurgence in property investment, with 37.1% of new home loans by value going to investors in May - the highest percentage in seven years.

Several factors are driving this trend:

1. Attractive buying opportunities: Lower price brackets, which saw less capital growth in 2023, are now offering better yields as rents continue to rise across the board. This has enticed more small-scale investors back into the market.

2. Record-high rents: CoreLogic reports the national median weekly rent reached $634 in June, an 8.2% annual increase.

3. Interest rate expectations: While the possibility of a rate hike to curb inflation exists, many investors anticipate eventual rate cuts, historically associated with property value increases.

4. Global economic trends: As other countries begin cutting rates, Australia is expected to follow suit eventually.

Experts suggest that investing now could be advantageous, given strong rental markets and potential future value appreciation as interest rates decrease.

Common misconceptions about property investors:

- Contrary to popular belief, most Australian landlords are not wealthy individuals owning multiple properties.

- The perception that investors primarily seek tax advantages through negative gearing is not representative of the typical Australian landlord.

Recent ABS tax data for the 2022 financial year provides more accurate insights into the profile of Australian property investors.

The data gives us an insight into who the average landlord is. Here are some key stats:

• In FY22, there were 2,268,161 rental property owners, up 1 per cent from 2,245,539 in FY21

• Of those 2,268,161 landlords, 71 per cent own just one investment property

• Almost one in two landlords who own one rental home earn less than $100,000 per year

• Plenty of landlords work in everyday industries. For example, just under 120,000 landlords are teachers or childcare workers. Another 120,000 are receptionists or administrators. About 95,000 are nurses, midwives or emergency service workers

The primary goal of the average Aussie investor is not to get tax breaks. It’s to build wealth through an asset class they understand to ensure a financially secure retirement. If you’re thinking of buying an investment property, you are among many other ordinary Australians who have made the same choice and reaped the benefits over the long term.

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.