‘Cash cow’ no more: Investors turn their back on Qld’s rental market

It was further revealed that two-thirds or 65 per cent of all investment dwellings that changed hands were potentially bought by owner-occupiers — indicating that 162,000 rental dwellings in Queensland were turned to owner-occupied housing. 

PIPA chair Nicola McDougall professed that they had misjudged how severe the investor exodus from the state’s rental market had been over the last two years.

“We had an inkling that investors had been selling their holdings over the past year or two, but these results show that even we had underestimated the volume of rental properties that have been jettisoned from the market,” she said.

Across the country, Queensland was found to have the highest share of investors who sold their properties over the past two years, followed by NSW (24.1 per cent) and Victoria (19.1 per cent).

“The fact that 45.1 per cent of investors sold at least one property in Queensland is mind-blowing,” Ms McDougall commented.

Nationwide, 16.7 per cent of the 1,618 property investors surveyed have sold at least one property over the period, representing a total rental supply drop of 10 per cent, or about 269,000 dwellings.

According to Ms McDougall, the staggering number of rental properties shaved from the country’s rental market is one of the main reasons why there is currently such a critical undersupply of properties available for tenants. 

But what triggered investors to say adieu to their rental properties? 

Survey results showed that the top three reasons investors cited over the last two years were the positive selling conditions (47.1 per cent), to reduce total borrowings (30.8 per cent), and changing tenancy legislation making it too costly or hard to manage (25.1 per cent).

The PIPA executive reflected that the figures explained why Queensland investors were not active in the selling front before the state’s property prices skyrocketed, adding that they may have been on the sidelines for a decade, waiting for any significant price growth.

“These investor insights help to explain why so many investors sold in Queensland because property prices were mostly stagnant there for years before the pandemic because of its underwhelming economy,” Ms McDougall stated. 

Over the past two years, the property expert revealed that investment activity in the state had been below historical averages. 

“So, after the moratoriums on rental evictions ended, and prices started to rise, investors offloaded their properties in the hundreds of thousands,” she said. 

But with peak prices in Queensland now a thing of the recent past as the market enters the downturn phase of the cycle, is the great sell-off over?

Unfortunately, a deeper look into the survey’s results indicate that dark clouds are still hovering over the rental market. 

The survey found that around 19 per cent of investors have signalled they intend to shed more real estate assets over the year ahead, with the majority citing Queensland’s new land tax law as their main reason for potentially putting a “for sale sign” on their property. 

In Queensland, a third of investors also voiced their intention to sell, also pointing to the new land tax as the top reason for shedding real estate from their portfolio. 

Under the state’s new land taxation system — set to take effect on 1 January 2023 — taxable land in Queensland and other relevant interstate lands will be used to calculate the relevant tax bracket that a property owner falls into.

Notably, the plan has drawn broad condemnation from the property industry and other involved stakeholders since it was unveiled by the government.

The Real Estate Institute of Queensland (REIQ) had rebuked the new tax law as “a slap in the face”, with the peak real estate body warning that the raft of changes to the taxation system could spell the end of interstate investment. 

Additionally, critics have warned that the latest law reforms could come as a shock for landlords and ultimately deepen the state’s rental strife. 

Ms McDougall said that the survey results were a clear message from investors: they are done being “cash cows” for the government. 

“From Coolangatta to Cairns, investors have deserted the Queensland market over the past two years, with more rental pain on the horizon as well,” Ms McDougall said. 

She pointed out that PIPA has been ringing the alarm bells about the potential rental undersupply for five years now, but governments had repeatedly refused to pay attention. 

“When we warned about the potential impact from lending restrictions on rental supply back in 2017, no one took any notice, and when we started highlighting the looming rental undersupply some two years ago, again, we were ignored as real estate zealots,” she said. 

“It is clear that investors are sick and tired of being treated appallingly by policymakers who continually believe that they are an endless supply of revenue for their coffers,” Ms McDougall concluded.