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While rate hikes prompted investors to divest, economists anticipate a surge in investment property purchases.
The most recent CoreLogic data indicates a rise in investment transactions throughout this year, and these expectations are gaining momentum into 2024, as cash rate forecasts by major banks have signalled a potential conclusion to the rate hikes.
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Over the past 18 months, the Reserve Bank of Australia has incrementally raised the cash rate by 400 bps, while in the last two months, it has held steady at 4.1 per cent.
As such, there are mounting expectations that the upcoming month will mark the third consecutive period of stabilisation.
The positive market sentiment has contributed to a surge in new investment loans as investors flock back to the arena, according to the latest report from CoreLogic.
Head of research at CoreLogic, Eliza Owen, said that as interest rates are predicted to start descending next year, there will be a corresponding surge in demand from housing investors and first-time home buyers.
She said CoreLogic data had already shown a rise in new investment loans secured since the start of the year.
“Investment loans are offsetting the rate at which new investment listings are being added to the market,” she said.
In light of the ongoing rental crisis across the nation, an upswing in investment acquisitions could also potentially alleviate the scarcity, thereby potentially curbing the escalation of rental costs.
The data comes against the backdrop of a continuous national surge in rent values, lasting for 35 months up to July.
CoreLogic has estimated that rents increased by 29.3 per cent since a low in August 2020 or the equivalent of a rise in median weekly rents of $134.
As of March 2023, it was estimated that an average of 30.8 per cent of income was required to cover new rents – an unprecedented level since June 2014.
However, the momentum is changing as rent growth initiates a deceleration.
“Slowing rent growth is expected to be one of the key housing market trends next year, for several reasons,” Ms Owen said.
Additionally, mounting rental affordability pressures might prompt relocations to more economically viable locales.
“Renters also tend to be on lower incomes, which means there could be a ceiling on how high rents can go before tenants adjust their housing preferences,” Ms Owen said.
Meanwhile, an ongoing Senate inquiry into the deepening rental crisis in Australia is set to continue its hearings on 30 August 30. The session will include testimonies from the Real Estate Institute of Australia (REIA) and the Australian Housing and Urban Research Institute (AHURI).
[Related: Rental inquiry hears of record property owner stress]
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