Cashed up investors to capitalise on rising prices


The resurgence in property prices has continued across the country, and investors are well positioned to capitalise on further growth according to the latest Herron Todd White (HTW) Month in Review.

HTW Chief Executive Officer, Gary Brinkworth, said there was no sign yet that price rises were easing.

“There was some speculation that property price growth may slow this year, but that hasn’t come to pass yet,” Mr Brinkworth said.

“Analysis to the end of February shows almost every capital city has seen values rise in the past three months with Perth, Adelaide and Brisbane recording some extraordinary results.”

He said one of the reasons for the growth was the economics of producing new housing. 

“There are too many pockets across this country where the cost to deliver a new home to market makes little sense if a developer expects a reasonable return on their investment,” he said.

He said prices would need to increase by 20 per cent, or development costs fall by 30 per cent if we wanted to incentivise developers toward creating more housing. 

HTW, National Director of Residential Ben Esau said the huge surge in population was also behind the rapid increase in prices and rents.

“The sharp rise in our immigration numbers throughout 2023 continues to support our economy, but it adds upward pressure on housing demand,” Mr Esau said.

“Strong immigration has supported record rental growth and low vacancy rates.”

He said the big immigration numbers presented opportunities for investors.

“Some cashed-up investors, who are less reliant on borrowing funds and haven’t been impacted by rising interest rates, are well positioned to take advantage of opportunities in today’s market,” he said.

“For those already holding investment properties, continued limited supply could create a windfall as the cost of servicing loans reduces without an accompanying reduction in achievable rent.”

National property clock for houses – Source: HTW

Sydney

HTW Associate Director, Matt Greenland, said with vacancy rates hovering between 1.2 per cent and 1.5 per cent across Sydney throughout 2023, both unit and houses had seen strong asking rent increases in the past 12 months. 

“Much of this rental growth can be attributed to a lack of supply combined with high net overseas migration, with recent analysis by Westpac showing approximately 70 per cent of new migrants rent,” Mr Greenland said.

“With low vacancy rates and strong asking rents likely to remain in place, investors are likely to continue to get into the market as interest rates start to fall and their borrowing power increases.”

Melbourne

HTW Director, Perron King, said the Victorian investor market had been heavily impacted by record immigration and a new flat rate tax of up to $975 to those with investment properties.

“The record boost in migration has seen vacancy levels also drop to record levels of 1.1 per cent in January 2024 in Melbourne according to SQM Research, meaning investors have had little trouble finding renters as prices have increased,” Mr King said.

He said affordable pockets like the Western Suburbs and Geelong were poised for further strong conditions for investors.

Brisbane

HTW Director, David Notley, said Brisbane had the right fundamentals for property investors in 2024 and there appeared to be excellent long-term opportunities on offer.

“For starters, our real estate remains relatively affordable as compared to Sydney and Melbourne,” Mr Notley said.

“For those wanting to dip a toe into the market, Brisbane is a great place to begin the journey. 

“Demand among renters remains at record highs as well with our rental vacancy rate constantly fluctuating around one per cent. 

“This is an astonishingly low number that indicates rents will continue to rise in the foreseeable future.”

Adelaide

HTW Valuer Nick Smerdon said investor activity had steadily increased since the early stages of 2023, as investors sought both capital gains and rental returns from an under-supplied market.

“Depending on proximity to the CBD, the investor market has historically been driven by rental returns within the outer ring and capital growth within the middle and inner rings,” Mr Smerdon said.

“Rental returns have tightened in the outer ring as price levels have increased sharply. 

“Demand for rentals remains at historic highs with Adelaide currently having the nation’s lowest vacancy rate at 0.3 per cent.”

Perth

HTW Director, Chris Hinchliffe, said Perth’s affordable prices had been driving investors west.

“Notably, active listings remain at near-record lows, with 3,738 listings recorded at the end of January,” Mr Hinchliffe said.

“Although this figure represents a 2.5 per cent increase from December 2023, it stands 46.2 per cent lower than January 2023.

“This competition for a very finite number of properties on the market is becoming evident.

“Our valuers in the field are reporting high levels of eastern states buyer activity when sighting contracts of sale.”

Darwin

HTW Valuer, Cameron McDonnell, said with relative affordability, tight rental markets and higher yields, the Darwin market was well-positioned for investors. 

“The typical investor is chasing higher yielding modern assets so they can take advantage of the depreciation along with having the security of the higher rental returns servicing any loan obligations,” Mr McDonnell said.

“Local real estate agents have anecdotally indicated there has been an uptick from investors from Victoria with Darwin seen as a more investor-friendly location, however, this has just been in passing conversation.”

HTW Director, Michelle Akhmediev, said over the past 12 months, investors had been on a difficult journey with numerous interest rate rises.

“The Canberra market has been unforgiving however it looks as though we may be past the destructive housing market downturns and are now on the rise to somewhat of a market recovery,” Ms Akhmediev said.

“There has been a noticeable shift from investors and buyers from wanting homes that have the potential to renovate to looking for homes that require limited or no renovations.

“The change to the Territory Plan which allows blocks over 800sq m to build a second residence will also considerably increase the number of homes in Canberra, which will positively influence the market.”

Hobart

HTW Valuer, Mark Davies, said investors had started to slowly return to the market, particularly in the lower-priced suburbs on the outskirts of Hobart. 

“Areas with all necessary amenities and good public transport are of particular interest,” Mr Davies said.

“Northern suburbs like Glenorchy, Moonah and West Moonah and Lutana (and surrounds) are lower priced localities where everything is in proximity.”



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