Australian Housing Market Continues to Defy Expectations Amid Rising Concerns Over Ageing Landlords - Property Inc

Australian Housing Market Continues to Defy Expectations Amid Rising Concerns Over Ageing Landlords

In a surprising twist, Australian property prices have continued to soar, despite rising interest rates and a negative sentiment towards landlords. As investors increasingly look to exit the market, a new challenge looms on the horizon: the ageing landlord population and its potential impact on the rental market.

According to the latest house price report by Ray White’s chief economist, Nerida Conisbee, property prices across Australia’s capital cities are recording YoY growth. Perth and Adelaide are leading the pack with annual growth rates above 6%1. However, even with more properties available for sale, the growth doesn’t seem to be slowing down.

Notably, while prices did dip in July due to unexpected interest rate hikes, the trend has since reversed1. Sydney witnessed the highest growth in August, with home prices increasing by 0.9%. As Thierry Ng reports, the high demand for housing, driven by rapid population growth and a reduction in new home constructions, is a major factor.

Despite the increased stock, CoreLogic’s Tim Lawless states, “most of this fresh stock is being absorbed by the market”. The total advertised supply levels are still notably lower than previous years.

But while property prices surge, another potential challenge is emerging. Juliet Helmke delves into the issue of ageing landlords and its potential impact on the property market2. According to recent data from the Australian Taxation Office, over half of all Australian property investors are aged over 50, with the majority of these being over 60.

As PropTrack economist Anne Flaherty points out, an investor’s age can significantly influence their investment strategy. Younger investors typically focus on capital growth, often tolerating negative gearing for its tax benefits. In contrast, those nearing retirement may prioritize rental income.

However, with the costs of holding rental properties on the rise, the net yield from these investments has declined, even as rents continue to increase. As Ms. Flaherty highlights, “Over the past five years the share of investors selling has been higher than the share buying – a trend that has accelerated post-COVID”.

This trend poses a concern, especially considering the current shortage of rental properties and Australia’s rapidly growing population. As Ms. Flaherty warns, the potential mass exit of older investors from the rental market could lead to significant challenges.

In conclusion, while the Australian housing market continues its unexpected growth trajectory, potential challenges await, particularly in the rental sector. The exit of older landlords from the market, combined with the declining appeal of property investments, could lead to unforeseen consequences in the future.

References:

“Australian property prices defy expectations as strong housing demand prevails and investors want out” – Thierry Ng ↩ https://thepropertytribune.com.au/market-insights/australian-property-prices-defy-expectations-as-strong-housing-demand-prevails-and-investors-want-out/ 

“Do ageing landlords pose a problem for the property market?” – Juliet Helmke ↩ https://www.smartpropertyinvestment.com.au/property-management/25058-do-ageing-landlords-pose-a-problem-for-the-property-market 

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