Real estate investors are expected to buy homes and apartments across Australia in 2022 as interest rates remain low and rental vacancy rates continue to tighten.
But experts predict that will not go smoothly, as future homeowners face the uncertainty of federal and state elections, with housing policies yet to be defined. They are also faced with possible increases in interest rates, which are emerging as a result of inflationary pressures.
While interest rates may not rise immediately, the stricter lending rules introduced in 2021 have already made it more difficult for investors to get a mortgage, said Daniel Koutsamanis, mortgage broker on the loan market. But that had yet to have a major impact on the number of people looking to invest.
Changes in lending rules, including the calculation of debt-to-income ratios (the amount a person can borrow based on their income) and interest rate buffers that determine whether a borrower can afford a loan mortgage if interest rates rise 3%, saw the amount available for borrowing drop from 5% to 10%.
“Budgets are going down a bit, but there has not been any drastic change,” Koutsamanis said. “There is still a pretty good confidence, the customers want to invest. The feeling is still pretty decent, strong enough.
This confidence follows an exceptional year for investors, as the number of new loan commitments jumped 89.6% over the year until October 2021, Figures from the Australian Bureau of Statistics showed.
There were $ 9.73 billion in new loan commitments for investment property in October alone, data shows, despite the blow to rental markets in Sydney and Melbourne during the year .
Rents in Melbourne have dropped significantly compared to 2021, making it one of the cheapest capitals to find a rental property. Apartment rents fell 7.5% on the year through September and house rents fell 2.3%, according to figures from the domain.
Sydney apartment rents fell 2% over the same period, while house rents rose as people searched for larger properties during the foreclosure.
Both markets depend on migration abroad to help fill rentals, including international students who have been left out of the market due to the COVID-19 pandemic.
Unlike Sydney and Melbourne, Queensland has seen an influx of new tenants and buyers, moving away from lockdowns in both cities.
Mr Koutsamanis said some investors are still considering buying in Queensland, where the vacancy rate has fallen below 1% and is only 0.5% on the Sunshine Coast, according to SQM Research.
An increase in renters is now expected in Sydney and Melbourne as international borders reopen to students, workers and foreign tourists, providing opportunities for investors across the country, said Lloyd Edge, managing director of Aus Property, based in Sydney.
“With the reopening of international borders, there is an opportunity for more growth, with returning students right now. I think the city’s properties might start to come back, ”Mr. Edge said.
Demand for Airbnbs could also return, providing investors with a way back into the short-term rental market, Edge added.
Although rents may improve slightly with the reopening of borders, they would remain lower until migration returns to normal levels and investors should think long term, holding properties for at least 10 years. said Wendy Chamberlain, Melbourne-based purchasing agent.
“Real estate is a forgiving investment over time, so investors should look to the long term. They need to buy assets that can weather the storm rather than be hit hard, like student housing. “
Ms Chamberlain said that looking further out of town and into regional areas, where investors could buy a larger property with their money, would help attract tenants looking for more space.
“I think the market will do quite well until 2022, but I think the prices will stay stable, we won’t have the kind of boom that we have had this year.”
Outgoing Real Estate Institute of Australia chairman Adrian Kelly said a balance between supply and demand, with more homes for sale across the country, should open up more opportunities for investors.
The number of homes for sale has fallen by 20 to 40% depending on the city, as people suspended their registration during the year due to blockages.
“What we’re hoping to see is that supply and demand start to balance,” Kelly said.
“We are hoping that a lot of people who have sat on their hands during the pandemic will sign up and it will free up homes for investors and first-time homebuyers.”