Sell Property in Australia

Australia’s property investors have faced many headwinds of late, with interest rate hikes, land tax increases, and market uncertainty driving a wave of investors to exit the property market across the country.

But investors in some states are struggling more than others.

The State of Property Investment in Australia

Recent PropTrack figures reveal that Victoria had the highest share of investment property sell-offs in July – 30.1% of sales were rental properties, a steep increase from 24.7% in July 2022 and just 16.9% ahead of the pandemic in July 2019, according to https://downunderrealty.com.

New South Wales and Queensland were close behind, however, with 28% and 27.2% of sales being investment properties, which were previously rented, respectively.

The numbers were lower in other areas of the country, but still significantly higher than pre-pandemic across all states.

In Western Australia, 25.5% of sales were investment properties in July, up from just 14% in July 2019.

In South Australia, Tasmania, and the ACT 20.4%, 17.1%, and 18.9% of sales were investment properties.

Share of Investment Property Sales:

1. NSW – 28%
2. VIC – 30.1%
3. QLD – 27.2%
4. WA – 25.5%
5. SA – 20.4%
6. TAS – 17.1%
7. ACT – 18.9%

Reasons for Property Investors Selling Up

There are several factors driving property investors to sell their assets in each state, but overall it boils down to two things: housing affordability and uncertainty.

Here are the key drivers:

1. Rising Interest Rates: Rising interest rates are making holding costs higher despite skyrocketing rents. This may lead to some investors selling off their existing properties to reduce their debt exposure.
2. Land Tax Increases: Land tax increases mean that some investors can no longer afford an investment property in addition to their residence. This is particularly the case in Victoria, which has the highest percentage of investment property sales, where the state government will slash the tax-free threshold for land tax on investment and second properties to $50,000, from $300,000, in an effort to rebalance their budgets with a larger tax take.
3. Robust Property Prices: Robust property prices mean that many investors are still able to capitalize on the equity in their investment property, so some are selling up to access that money.
4. Increased Government Intervention: Increased government intervention is dissuading investors. Many aren’t happy with the increased cost of running a rental property at the same time when tighter rental controls reduce the amount of control they have over their property, so are exiting the market altogether.
5. Market Uncertainty: Market uncertainty, particularly concerns about the global economy and the potential for future interest rate increases, means some investors are opting to reduce their exposure to property investments. However, in my mind, this is short-term thinking as there is clear evidence that many sectors of the property market have turned the corner with prices rising for 6 months now.
6. Baby Boomers Retiring: Baby boomers are approaching retirement and are also reevaluating their options – many are deciding whether it is more financially viable to sell their existing investment properties and either reinvest elsewhere or cash in.

Impact on Australia’s Rental Market

And this will put even more pressure on Australia’s rental market.

Ultra-low vacancy rates combined with a low supply of new dwellings, high demand, and a rising population have created a perfect storm environment that has pushed Australia’s market into a rental crisis.

Not only that but there is no end in sight to the rental crisis… in fact, it’ll probably just get worse.

Particularly if the rate of investment property sales continues at this same level, or worse, picks up further.

Our population is surging and it’s pushing supply to worrying lows, but instead of tackling this issue, current policies have a different tact.

And they aren’t supportive of attracting more private property investors to supply rental accommodation.

Australian Labor Party Plans to Build 1.2 Million Homes

Sure the Australian Labor Party has ambitious plans to build 1.2 million homes in the next 5 years, but if you look closely, the numbers just don’t add up.

Labor’s plan does not address:

1. Affordable Housing: With the apartment supply dwindling and construction costs soaring, how can we provide affordable housing?
2. Necessary Infrastructure: The budget allows for a mere $3.5 billion over five years. It’s a pittance when you consider the required roads, schools, hospitals, public transport, and other social infrastructure.
3. Social Housing: A one-off grant of $2 billion for social housing barely scratches the surface.
4. Poor Construction Quality: It’s hard to forget the problems experienced in many of the shoddily built apartment towers that were built over the last decade. Remember Opal and Mascot towers in Sydney and the cladding problems many Melbourne apartment buildings experienced?

How to Invest in the Current Property Cycle

If you’re like many property investors, you’re probably wondering what’s the right thing to do at present. Should you buy, should you sell, or should you just wait? You can trust the team at Metropole to provide you with direction, guidance, and results. Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi-award-winning team at Metropole. We help our clients grow, protect and pass on their wealth through a range of services including:

1. Strategic Property Advice: Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more.
2. Buyer’s Agency: As Australia’s most trusted buyers’ agents we’ve been involved in over $4 Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property. Click here to learn how we can help you.
3. Wealth Advisory: We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about how we can help you.
4. Property Management: Our stress-free property management services help you maximize your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.

In conclusion, the Australian property market is experiencing significant challenges, with property investors selling up due to factors such as rising interest rates, land tax increases, and market uncertainty. This trend is impacting Australia’s rental market, which is already facing a crisis due to low supply and high demand. The Australian Labor Party’s plans to build homes may not adequately address the issues of affordable housing, necessary infrastructure, social housing, and construction quality. As an investor, it’s important to carefully consider the current property cycle and seek guidance from trusted professionals who can provide strategic advice and support.