Why property investors are selling now – and why they’re buying even more

More investors are buying property than selling, new analysis suggests, as investors with less debt take the place of those with more.

The CoreLogic analysis showed the number of new loans to investors had consistently outpaced the number of inferred investor listings – properties that investors are selling – across Australia and in each state.

The number of investor listings was rising to about 13,000 in October, but was below its November 2021 peak. In comparison, the number of new investor loans for the same period was 18,400.

CoreLogic head of Australian research Eliza Owen said the analysis was intended to make sense of competing narratives about investor activity: on one hand that investors are selling up, and on the other that more investors are buying in.

“One [narrative] is that investors are done. Then there’s this other piece, when you look at ABS investor finance, investors are making up a bigger chunk of the market,” Owen said. New loans to investors were up 18.8 per cent over the 12 months to September, according to ABS data.

The research did find that more investors than usual are selling. But the data suggested that even more investors are trying to get into the market than out, Owen said.

This is true even in Victoria, where the state government has been criticised for disincentivising landlords by increasing land tax on investment properties and strengthening legal protections for renters.

The number of Victorian investors selling had been higher than the number of investor loans only once in the past year. Owen said the market was balanced.

NSW was more closely following the national trend, Owen said.

“The volume of investment listings coming to market was actually 7 per cent higher than the historic five-year average and it was higher than in Victoria as well, so about 3900 through the month of October,” she said. “The difference with NSW is that while listings were higher across the state, new investor loans were also up, almost 20 per cent across NSW.”

This was in contrast to Victoria, she said: “The listings from investors are about 10 per cent higher than you would usually see in any month. The number of loans is a little bit higher than what we see in the listings data but that’s not as robust as the national figure.”

Owen said the kinds of investors in the market may be changing, and pointed to Reserve Bank comments that less leveraged investors may be taking the place of more highly indebted ones. Rentvesting has also edged up, although remained small in absolute terms, she said.

Westpac senior economist Matthew Hassan said the analysis showed the narrative that landlords were fleeing the rental market to a degree that affected the supply of rentals – particularly in Victoria – wasn’t as clear-cut as it appeared. “It does challenge the notion,” he said.

The number of new listings in Victoria picked up in the quarter following the announcement that land tax would be expanded to capture more investment properties, he said, adding that investor listings were higher than they would be otherwise, but not by much.

“There was a big rise in listings, especially for units and it coincided with big price declines, and it was happening in these middle ring suburbs,” he said. “It would be quite a surprise if that wasn’t the story and I think we would be struggling to account for Melbourne’s underperformance.

Owen said weak capital growth was also prompting Victorian investors to sell.

“I think it’s fair to say there’s more selling activity and it could be induced by higher taxes since the start of the year, the sluggish capital growth environment, the high-rates environment, and maybe investors are just a bit more spooked on Melbourne … but it hasn’t stopped modest growth in investor loans since last year,” she said.

Sydney-based Equilibria Finance managing director Anthony Landahl said investor activity was up, buoyed by more realistic investors and by first home buyers who opted to buy an investment to get onto the property ladder.

“Investors were very subdued in the 12-18 months when interest rates were going up quite quickly,” he said. “What we’re seeing now is some people who were thinking about buying a home not being able to afford a home and investing instead, and a lot more investors understand the cashflow requirements a bit more.

“While the rental market is quite strong, they’re acknowledging they’re still cash flow negative month to month.”

Landahl said some of his clients were considering buying in Melbourne while prices were subdued, in the hopes of achieving strong capital growth when prices rose.

“Albeit, they’re obviously a little bit wary of what’s been happening in Victoria, in terms of taxation and what’s happening with investors,” he said.

Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.