‘Had enough’: rattled investors cash out of Sydney properties

Sydney’s once dominant property investors have been jumping ship from the Harbour City, driving a big shift in the housing market.

Landlords are increasingly cashing out of the housing market because of higher interest rates, with the number of investor property sales hitting double the levels seen before the pandemic.

And with new investment activity remaining low, economists are warning the sales could put even more pressure on struggling renters by draining the supply of vital rental properties.

PropTrack figures showed 26 per cent of all NSW property trades in June, the latest period with available data, were rental properties – a 7 per cent rise since the RBA’s first cash rate hike in May last year.

Investor sales had already been rising before then because of the lockdown-era property boom in 2021 as investors sought to capitalise on skyrocketing prices and rapid sales.

One in four Sydney homes sales in June was from an investor. Picture: Julian Andrews.

Experts said that trend has continued with many investors selling in the current market to take advantage of substantial capital gains over recent years.

The difference was that these investors weren’t selling purely for opportunistic reasons – many were finding their holding costs had become too much of a burden because of higher repayments.

Investor sales were considerably lower before the pandemic, accounting for 13-14 per cent of sales for much of 2018 and 2019, PropTrack’s data showed.

Ray White chief economist Nerida Conisbee said the rise in investor sales followed a pattern that started late last year, where many owners of holiday homes and boats were selling to drive down their expenses.

Ray White chief economsit Nerida Conisbee.

Higher property investor sales may also reflect landlords’ struggles to pay higher interest on the loans for their residencies, Ms Conisbee added.

“Rents have increased so they may not be in the position where they are forced to sell but they figure it is a good time to sell the investment to pay off more of the debt on the family home,” she said.

“There could be others in a position where they decided they could use the cash they’d get from selling.”

Real Estate Buyers Agent’s Association of Australia president Cate Bakos said it was likely investors sales would rise by the end of 2023.

“The talk of rent caps is rattling many investors, and combined with the stresses of the eviction moratoriums, the onerous rental reforms, the interest rate increases, the tougher borrowing hurdles for investors … landlords have had enough,” Ms Bakos said.