Myth or reality? Investors are leaving the market in droves.
I’ve seen a few reports recently of a mass exodus of investors from the property market. They’re leaving in droves apparently.
I haven’t noticed this first hand, so I thought I should look into it.
So, at one level it’s true. There are a lot of investors selling right now.
CoreLogic recently released data showing that nearly one-third (32.7%) of new for-sale listings were being added by investors, up from the decade average of one-quarter:
That’s a substantial pick-up, and seems to be the data-point that all the exodus stories point to.
This trend is particularly pronounced in Sydney (40%) and Melbourne (36%).
But then when you look into it, you see that while there are a lot of investors selling right now, there are also a lot that are buying.
The Australian Bureau of Statistics (ABS) housing finance data shows that investor demand is approaching the 2015 peak:
What’s more, the share of new mortgages going to investors has risen to 35.3%, which is the highest since 2017. This has come at the expense of first-home buyers:
Not only that, REA Group economist, Angus Moore, recently told Sky News that investor demand is ramping up across Sydney:
“What we’re seeing at the moment is just the fact that rental markets are really attractive for investors”.
“Vacancy rates across the country are extremely low. [This] means you just have very low risk of your property sitting vacant, so that’s quite attractive to investors”.
“You’ve still got migration rising in Australia. You’ve still got the lack of building taking place. So, the equation is rents are rising, they’ll continue to rise which again will tick the odds in favour of these investors who are obviously smelling the breeze”.
“The fact that interest rates look like we might have reached the peak, that’s going to start to make that a bit more attractive”.
So what you’ve got is not a ‘mass exodus’ of investors.
Rather, there’s churn. Investors are selling to other investors.
And why?
Well, PropTrack released the below chart showing the number of Australian landlords by age.
As you’d expect, the majority of investment properties are owned by older Australians.
That is, over 60s own the highest number of investment properties followed by 50 to 59 year olds and 40 to 49 year olds, and so on.
And so what we might be seeing is the baby-boomer sell down.
That is, if you’re at that stage of life where you’re thinking about liquidating some of your investments to fund your lifestyle, you might be looking at the current market peak and think to yourself, well, now is as good a time to sell as any.
The next peak might be years away.
And that probably makes sense.
But there’s no shorter of younger investors hungry to take their place.
At any rate, we can say this myth is busted.
There is no mass exodus of investors.
Why would there be.
DB.