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By Michael Yardney
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Property investors aren’t waiting for rate cuts | Property Insiders [Video]

key takeaways

Key takeaways

Rents are rising faster than home values, and gross rental yields are trending higher. However, with variable interest rates averaging 6.7%, many investors are recording a cash flow loss despite the substantial rise in rental income.

New home and investment property loans rose in March for the second consecutive month, with first home buyers leading the way, with loans to this group growing by 4.4% over the month and by 17.9% over the year.

ABS Lending Indicators show that new lending activity increased in March, with total housing commitments reaching $23.44 billion, owner occupied excl. first home buyers reaching $11.29 billion, investment reaching $7.75 billion, and first home buyers reaching $4.40 billion.

The weekend auction market produced more overall positive results over the long weekend, with Canberra having the strongest auction clearance rate of 74.9%. The national weekend auction market reported a clearance rate of 67.1%.

The latest ABS Lending data shows the value of new lending rose for the second consecutive month, with buyers and particularly property investors ignoring the debate over when interest rates will be cut and jumping into the market now.

Last week we reported My Housing Market’s end-of-month figures showing that property prices have continued rising around Australia – that’s 17 months in a row now, meaning it is many first-home buyers are facing a heartbreaking battle and it is doubly hard because rents are skyrocketing, and in today’s Property Insider chat with Dr. Andrew Wilson, we will discuss the latest My Housing Market Rental Report.

Still no sustained relief likely for tenants

Watch this week’s Property Insiders chat as Dr Andrew Wilson discusses the latest My Housing Rental Report, which showed capital city home rental markets tightened over May, with vacancy rates for both houses and units falling across the board in all capitals.

A vacancy rate of around 2% is considered a balanced market where there is a sufficient supply of rental accommodation to satisfy tenants’ needs, and as you can see from the tables below, we are far from this situation at present, suggesting the rental crisis will continue for some time, with the minimal extra supply on the horizon there is no relief in sight.

Median Weekly Asking Rents May 2024 Houses

A predictable surge in May rental demand following the easing in activity over the April holiday month has produced more bad news for tenants.

With rents rising at a faster pace than home values, gross rental yields have continued to trend higher, and maybe that’s one of the reasons more investors are entering the market.

For most investors, these higher yields will be welcome, considering variable interest rates for investor loans are averaging 6.7%.

However, given the high cost of debt, many investors are recording a cash flow loss despite the substantial rise in rental income, but residential property was always a high-growth, low-yield investment.

Median Weekly Asking Rents May 2024 Units

Home loans keep rising

Watch this week’s Property Insider video as Dr Andrew Wislon and I discuss how the value of new lending rose in March for the second consecutive month, with buyers jumping into the market now amid lower borrowing power instead of waiting for rate cuts

The latest ABS Lending Indicators seasonally adjusted data shows a total of $27.64 billion in new home and investment property loans were taken out in March, an increase of 3.1% from February.

Home Loans Again Sharply Higher

The surge in new lending in March has been led by first home buyers, with the value of loans to this buyer group growing by 4.4% over the month to $5.19 billion in March and was up by 17.9% over the year.

However, over the last year lending to investors increased 31.1%, as the following charts and table show.

Rising house prices and rental yield, as well as the expectation of lower interest rates later in the year, are encouraging investors into the market in boom-time proportions.

Investors Surging


ABS Lending Indicators - New Lending Activity
Mar-23 Feb-24 Mar-24 Difference % Change
MoM YoY MoM YoY
Value of new housing commitments
Total Housing $23.44 billion $26.80 billion $27.64 billion $839.0 million $4.20 billion 3.1% 17.9%
Owner Occupied excl First Home Buyers $11.29 billion $12.04 billion $12.29 billion $252.7 million $998.5 million 2.1% 8.8%
Investment $7.75 billion $9.80 billion $10.17 billion $368.7 million $2.41 billion 3.8% 31.1%
First Home Buyer $4.40 billion $4.97 billion $5.19 billion $217.6 million $789.3 million 4.4% 17.9%
Source: www.canstar.com.au. Based on ABS Lending Indicators, seasonally adjusted figures unless otherwise indicated.

 

Investors Tops Again For Home Loans

More positive weekend auction results over the long weekend

Weekend auction markets have produced more overall positive results despite the distractions of the long weekend holiday enjoyed in all capitals except Brisbane.

Canberra had the strongest auction clearance rate of 74.9%.

Auction clearance results for the other capitals were:- Melbourne - 58.1%; Sydney - 72.9%; Brisbane - 55.6%, and Adelaide - 74.1%.

The national weekend auction market reported a clearance rate of 67.1% which was higher than the 64.1% reported over the previous weekend – but slightly lower than the 69.7% recorded over the same weekend last year.

National auction numbers were predictably lower over the holiday weekend with 1062 listings versus the previous weekend’s 2077, but again still significantly above the 734 listed over the same weekend last year.

The June long weekend auction market has generally reported more solid results, with another strong performance from listing numbers compared to the same holiday weekend last year.

3.1 Auction Results. Png

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
120 comments

Wages growth figures don’t include superannuation or the recent payroll tax changes in Victoria either. This means that the actual cost to business has had at least another 2% added to the payroll over the past few years with some more yet to com ...Read full version

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That is the nature of the game. Stagnant, stagnant, stagnant, stagnant (half the investment punters give up and sell), stagnant, stagnant (most of the rest do the same), stagnant, stagnant, explodes recouping all the losses and more so those who hung ...Read full version

1 reply

I just pulled out an old residential lease dated 2013 and found the rent on that was the same as it was in 2022/23. So in reality rents didnt go anywhere for 10 whole years. A little up, then and a lot of down during COVID19, and then up again. Its ...Read full version

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