As we kick into another year, I thought it was worth a high-level assessment of where things currently stand in the property investment market and some key points to consider.
First, given 40% deposits (unless buying a new-build), low gross rental yields, higher mortgage rates (and tough serviceability tests), increased compliance costs, removal of interest deductibility, and flattening rents, it’s tough to get the sums to stack up at present. Certainly, most additional (or first) purchases would require a top-up from other income, potentially quite substantial. The CoreLogic Buyer Classification data shows that mortgaged multiple property owners (MPOs, including investors) are currently running at about a 21% share of purchases, close to all-time lows.
That said, it’s not a total disaster – still, one in every five deals is going to a mortgaged MPO. To be fair, it’s within a low overall number of transactions. But clearly, some investors are still finding value – new-builds are undoubtedly one of these opportunities, and anecdotally there are ‘bargains’ to be had, with developers looking to shift stock so they can crack on with their next project. Others will deal in existing properties at discounted prices in the weak market.
Meanwhile, cash MPOs are enjoying those weak market conditions too. Their share of purchases has risen from around 10% in late 2021 to closer to 15% now – that’s a record high. It stands to reason that ‘cash is king’ in a market where finance is restricted and costly.
What about when we look at investor activity by size? The drop-off for mortgaged buyers has tended to come at the smaller end of the spectrum, i.e. those with two properties after their latest purchase (i.e. a first-time investor) and those with 3-4 properties (generally their own house and...
