Investors’ numbers dwindle
Australia is facing a notable decline in residential property investment, raising alarms about future rental and housing shortages, according to the Real Estate Institute of Australia.
Recent data from the Australian Bureau of Statistics revealed a 4.5 per cent decline in investment loans for residential dwellings in the December quarter, the first drop since early 2023.
Conversely, new home loans, excluding refinancing, increased for the third consecutive quarter, indicating robust activity among owner-occupiers but a retreat in investor participation.
Leanne Pilkington, president of Real Estate Institute of Australia (REIA), raised concerns about the increasing imbalance in the housing market, noting that investors play a crucial role in maintaining the availability of rental properties.
She emphasised that the decline in new investment loans is a troubling sign for the future of housing supply.
“With vacancy rates already at record lows in many parts of the country, a continued drop in investment will further strain the rental market, driving up rents and exacerbating affordability challenges for tenants,” Pilkington said.
The REIA president noted a slight 0.4 per cent decrease in new loan commitments for dwellings this quarter, while the value of these loans increased by 1.4 per cent.
She indicated that borrowers are opting for larger loans despite higher interest rates.
Pilkington also reported that the housing market has shown positive trends.
“The good news is there was an increase in first home buyers with loan commitments rising 1.3 per cent in number and 1.5 per cent in value, reflecting ongoing government incentives and support schemes,” she said.
However, Pilkington cautioned that despite the positive trend among first home buyers, the increase does not alleviate broader supply constraints.
“Without sufficient investor participation, we risk further undersupply in the rental market, making housing affordability an even greater challenge,” she stated.
To address the downturn in investor lending, Pilkington called for policy interventions aimed at encouraging investment in residential property.
“Policymakers need to address the barriers discouraging investors, such as rising costs, tax settings, and regulatory uncertainty,” she said.
Pilkington noted that the government reaffirmed in Question Time that it intends to maintain current negative gearing policies if re-elected.