Melbourne landlord exodus: PropTrack figures show spike in property investors selling up
Victorian landlords evicting themselves from the state’s property market have racked up the highest share of home sales since at least 2018. And it could have a “structural shift” on the market.
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Victorian landlords evicting themselves from the state’s property market have racked up the highest share of home sales since at least 2018.
PropTrack figures show about 29 per cent of sales across the state in June were landlords getting out, while the state’s biggest real estate agency has revealed the Melbourne exodus is so extreme that less than half the homes sold by investors are being replaced by new investments.
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Accountant Josh Ng is selling his Craigieburn investment property, in part so he can upgrade his own home following his wedding in a few weeks time, but also because on January 1 next year the land tax-free threshold will plunge from $300,000 to $50,000.
After buying the 14 Cerulean Walk investment property in 2019, he said he had stuck it out through the lockdown era even though he’d found things a “bit dicey” as the Rental Tenancies Act changed and a moratorium was placed on evictions.
“You could understand, people were going through hard times,” Mr Ng said.
But next year’s cost hike was a step too far for him and he is now hoping to sell the property for $460,000-$480,000.
Ray White Craigieburn director Trish Orrico is handling the sale and said she had issued 13 notices to vacate to tenants in the area over the past three weeks. Others at her agency had broken the hard news to tenants too.
“We are not expecting investors to buy them,” Ms Orrico said.
“We are encouraging tenants to break leases early and move out. And the prices for rentals have skyrocketed because there’s just not a lot available.”
PropTrack economist Paul Ryan said landlords were likely selling for a profit, though rising costs could be a factor, with an about 6 percentage point rise in the share of the market since interest rate hikes commenced in May.
“It’s starting to signal that perhaps investors are responding to financial pressures across their portfolio, and with property prices still up from the start of the pandemic, it wouldn’t be surprising if they are selling to make a profit,” Mr Ryan said.
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The figures also show landlord sales in Victoria are now close to double the about 15 per cent they accounted for in 2018.
Mr Ryan said he was not yet concerned at the stats, which track homes sold that had been listed for rent since their previous sale, as the number of new properties for lease on realestate.com.au was rising.
But he said it would be interesting to see if the “structural shift” corrected as more homes hit the market
Australian Bureau of Statistics figures released this week showed 4749 of the 13,829 home loans issued in June went to investors in Victoria, about 34.3 per cent.
These reflect homes settled in the month rather than sold and include loans for sales signed in the months prior that could also cover investors who intend to lease homes for short-term stays, and those who might never make a home available to tenants.
Ray White auction data across the past month shows a third of sales were on behalf of outgoing investors, while just 14 per cent of purchasers had investment in mind.
In real numbers — the firm recorded 91 investor purchases out of 630 auction sales across June and July this year. In 2022 the figure was 109 from 613 sales, 18 per cent.
Heavily skewed towards Melbourne, the data more closely reflects homes facing larger land tax and mortgage costs than in regional locations.
Victorian chief executive Stephen Dullens said the about 22 per cent drop in investor purchases was againsta backdrop of rising international migration.
“We have all these issues around rentals and there’s a lot of talk about needing more supply, whereas many of the things being discussed at the moment, I don’t think they encourage supply,” Mr Dullens said.
The PropTrack stats also show the share of landlords selling out of the market has been above 20 per cent since the introduction of significant changes to the Victorian Tenancy Act in March 2021.
Real Estate Buyers Agent’s Association of Australia president and Melbourne-based landlord Cate Bakos said this as well as a rental moratorium during lockdowns had put significant “strain” on investors, particularly after noting a number of older investments in need of a renovation hitting the market in that time.
“Our tribunal (VCAT) had ridiculously long wait times for hearings, and many owners who had non-paying tenants after the lockdowns had no other recourse, except to sell,” Ms Bakos said.
Ms Bakos added that upcoming land tax changes would compound rising interest rates and Victoria had “only seen the start of an exodus of investors”.
“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, and the higher land tax costs — landlords have had enough,” Ms Bakos said.
“I predict that by end of year, our percentage of investors selling will climb towards 40 per cent.”
BMT Tax Depreciation Quantity Surveyors chief executive Bradley Beer said typically more than 20 per cent of the depreciation schedules his firm created were for people planning to turn their former home into an investment, but that the figure would drop in Victoria over the current financial year.
“The things that are being done and the talk around investors would absolutely mean that there are likely to be some going ‘this is too hard’,” Mr Beer said.
With investing in Victorian property increasingly expensive and complicated, he said many of them might just sell the home instead of trying their hand at becoming a landlord.
“But the bigger problem is the lack of additional supply coming through,” Mr Beer said.”
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