What’s causing investors to sell? New survey reveals investment pain points
One in five investors who sold within the last 12 months held their properties for less than three years, showing how cost pressures are impacting churn.
The 10th edition of the the Investor Sentiment Survey conducted by the Property Investment Professionals of Australia (PIPA) has revealed concerning trends in the trajectory of the nation’s rental supply, given how property owners are considering their investments.
Even more investors sold a property over the year to August 2024 than they did last year, according to the organisation’s research, with about 65 per cent of these former rental properties being purchased by home owners rather than investors.
Overall, 14.1 per cent of respondents sold at least one investment property in the past year – an increase from 12.1 per cent last year.
Of those investors exiting the market, the property was bought by another investor in 31 per cent of transactions. This is up from 24 per cent last year but in line with 33 per cent reported in 2022. Home owners were responsible for buying 44 per cent of the properties transitioning off the rental market, while first home buyers made up 21 per cent of the share.
PIPA chair Nicola McDougall noted that while it was good to see investor participation, their rates of purchase were still below what is required to bring more stock to the rental market and increase vacancy rates.
“Yes, investors are still buying rental properties, but not at the rate that is needed to replace those that have been lost nor to keep up with the rental housing needs of our soaring population,” she said.
Holding costs and taxes exert pressure on investors
Of the investors who sold over the past year, nearly 65 per cent said they had kept the property for less than 10 years. Alarmingly, nearly one in five reported they sold an investment property after holding it for less than three years – a very high rate of turnover and another cause of instability for the rental market.
“It’s clear that investors have not only had enough of being the golden gooses to financially fluff up state government bottom lines, but they also are reacting to the myriad rental reforms and property taxes that now make holding an investment property either unpalatable or unviable for them,” McDougall said.
Increased general holding and compliance costs, such as insurance, minimum housing standards and property management fees, were the biggest cost pressures motivating investors to sell, with 44.1 per cent citing these factors as influencing their decision. The cost pressures of land tax or government charges was the reason 35.4 per cent gave for selling. Meanwhile, 32.9 per cent said they parted with an investment property to reduce their investment exposure.
“Interestingly, increased lending costs was not in the top three reasons for selling (25.4 per cent),” McDougall commented.
Victoria is seen to be the least accommodating state or territory for property investors, according to the poll, followed by the ACT and NSW.
At the other end of the spectrum investors believe that Western Australia is the most pro-property investment state in the nation.
McDougall noted that NSW has had the biggest turnaround compared to last year – and not in a good way. Last year, it was viewed as the most accommodating of property investors, but this year it is viewed as having anti-property investor tendencies.
“Conversely, Queensland has improved in the rankings with investors, increasing from one of the worst to one of the best states or territories for property investment. Clearly, it has learnt from the disaster that was the interstate land tax debacle in 2022,” she added.
The Sunshine State tops the list of sales
But just because investor outlook on Queensland’s hospitality to investors has improved, does not mean that investors’ plans are necessarily changing when it comes to holding or selling.
Brisbane one again experienced the highest percentage of investor sales over the past year, with survey respondents indicating they had sold at least one dwelling in Brisbane (26 per cent, up from 23.3 per cent last year), Melbourne (21.7 per cent, down from 24.8 per cent last year) and Sydney (14.9 per cent, up from 8.9 per cent last year).
When it comes to investors selling in regional areas, the number one location was regional NSW (10.5 per cent) followed by regional Victoria (9.32 per cent, up from 6.4 per cent last year) and regional Queensland (7.4 per cent, down significantly from 16.4 per cent in the 2023 survey).
“The strong market conditions in the Sunshine State over the past year can partly explain its high volume of investor sales, while the New South Wales and Victorian governments have introduced a plethora of anti-investor rental reforms and new property taxes over the same period,” McDougall said.