The number of investment properties hitting the market has soared past decade-long averages in three capital cities, despite overall new listings remaining well below normal.
CoreLogic Head of Research Eliza Owen said in Sydney, Melbourne and Perth in May, investor listings were significantly higher than the previous decade average.
She said the proportion of investor listings on the market last month were highest in inner city areas, which were traditional hot spots for multiple property owners.
“For example, the SA3 market ‘City and Inner South’ in Sydney has a historic 10-year average of 38 per cent of new listings coming to market from investors,” Ms Owen said.
“In May it topped the list of regions with the highest proportion of investment listings, surging to 57 per cent.”
The Melbourne Inner region also recorded a higher than average level of investor listings in May, with 49.3 per cent of new listings coming to market from investors, compared to the 10-year average of 40.2 per cent.
In Perth, the Inner region again led the way with 47.5 per cent of new listings coming to market from investors, which is well up on the decade-long average of 36.2 per cent.
Ms Owen said what made this trend even more startling was that it was occurring at a time when total listings were low.
“As of May, total new listings added to the market were 20 per cent below the previous decade monthly average across Australia, while new investor listings are only 2.9 per cent lower than the previous decade monthly average,” she said.
“In three capital cities – Sydney, Melbourne and Perth – investor listings for May were higher than the previous decade average.
“This signifies that investor selling activity is persisting in an environment where owner-occupier selling decisions are waning.”
CoreLogic infers which listings are investor-owned based on the rental history of each property.
Ms Owen said it was worth noting that while investor listings were elevated, and appear to be still rising, the share of investment listings overall are not as high as the July 2021 peak, when annual growth in the Home Value Index was 16.1 per cent.
She said there were a few things that could be prompting investors to sell.
“The first driver might be higher interest costs over the course of the year,” Ms Owen said.
“Based on average interest rates for investors, we estimate mortgage costs on a $500,000 loan will have increased $860 per month, to $3213.
“While rents have risen at a record pace over the past few years, they generally have not risen as much as mortgage costs on a new loan.
“If the interest burden is becoming too high amid an already high inflationary environment, investors may be looking to offload their investment.”
Ms Owen said capital growth could also be behind the investor listings.
“If you look at a city like Perth, where the portion of investment sales surged in mid-2020 and remained high ever since, this may reflect investors finally getting some pay-off after a long period of decline in home values for much of the 2010s,” she said.
“While east-coast cities like Sydney, Melbourne and Brisbane have seen a decline in home values since interest rates started to rise in May last year, Perth values have held fairly steady, and indeed reached a new record high in May this year.
“Not only is the portion of investor listings high, the volume of new investment listings through May were 19 per cent higher than the previous decade average.”
