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By Adam Hubbard

Melbourne and Sydney property investors exit as taxes and returns deter

Property investors are exiting Melbourne.

In May, over 3,000 property investors decided to leave Melbourne, marking a 34% increase from the previous year, according to an article from the AFR.

The article noted that nearly 4,000 ex-rental properties across Victoria were put up for sale, exacerbating the already critical shortage of rental options.


Why is this happening?

According to the article, the rising tax burden is pushing more landlords out of Victoria, and this ongoing trend could lead to further rent increases as more rental properties are converted to owner-occupied homes.

This pattern isn't just isolated to Victoria.

New South Wales also saw a significant exodus, with 3,593 rental properties offloaded by investors in May alone—a 20% increase from the previous year.

In Sydney, this amounted to 2,372 investor-owned properties hitting the market, up 17% from last year.

Across Australia, May saw 13,198 ex-rental properties listed for sale, marking a 10.7% increase from the previous year and representing 19.3% of all property listings.

Areas like Parramatta and Sydney's inner south-west saw nearly 500 ex-rental properties listed, with the inner west and Hornsby areas not far behind.

The AFR article highlighted that investors are expressing concern over NSW's new land tax policy, which freezes the tax-free threshold at the 2024 level.

This move is seen as a disincentive for further investment in the state, pushing investors to consider markets elsewhere.

In fact, Tim Lawless from CoreLogic notes in the article that investors are generally driven by capital gains and might find WA and Queensland appealing due to their robust markets and higher rental yields.

Interestingly, Victoria saw the smallest increase in approved loans for investors, up just 25.7% over the year to April, in stark contrast to the surges in WA and Queensland.

This shift has had a visible impact on Melbourne’s market dynamics, with total stock across the city jumping 17% in May year-on-year, surpassing the five-year average by 13%.

Westpac analysts suggest that this excess stock, coupled with high interest rates, will continue to pressure home values downward.

Despite these challenges, Lawless remains optimistic about the resilience of the housing market.

He commented, "Even with elevated interest rates, the housing market is holding up, with values still on the rise as of June."

A final note for investors

As I always say, when it comes to property investment, the focus should be on investment-grade properties in A-grade locations.

Never follow a trend or buy in hotspots or growth areas because these won’t give you the long-term growth that you’re looking for.

I’m talking about areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.

About Adam Hubbard Adam Hubbard is a senior Wealth Strategist at Metropole and his many years of real estate and wealth creation experience gives him a holistic perspective with which he helps his clients safely grow their wealth through property.
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