Surging house prices across Queensland have caused a wave of investor selling, the the number of available rental properties dropping dramatically.
According to the 2022 Property Investment Professionals of Australia (PIPA) 8th Annual Investor Sentiment Survey, about 30 per cent of rental homes have been taken out of the Queensland rental pool in just two years, with 162,000 investment properties potentially sold to owner-occupiers.
The survey found that nearly half (45.1 per cent) of investors had sold at least one property in Queensland in the two years, with nearly two-thirds (65 per cent) going to owner-occupiers.
In a sign of more rental stress to come, 19 per cent of investors have signalled they intend to sell more property over the year ahead, with the top reason being Queensland’s new land tax law, which will charge tax based not just on the value of an investor’s Queensland land but also on the statutory value of any interstate land they own.
PIPA Chairwoman Nicola McDougall said it was clear investors have had enough of being the cash cow for all levels of government.
“From Coolangatta to Cairns, investors have deserted the Queensland market over the past two years, with more rental pain on the horizon as well,” Ms McDougall said.
“We had an inkling that investors had been selling their holdings over the past year or two, but these results show that even we had underestimated the volume of rental properties that have been jettisoned from the market.
“The fact that 45.1 per cent of investors sold at least one property in Queensland is mind-blowing – especially since this was mostly a period when the ridiculous new land tax wasn’t even law.”
Ms McDougall said investment activity had been below historical averages recently, with analysis suggesting it was owner-occupiers, including first-time buyers, who had purchased the former investment stock.
With nearly 269,000 former rental dwellings potentially being bought by homebuyers nationwide, she said it was clear this was one of the main reasons why there is such a critical undersupply of properties available for rent.
“The number one reason why investors sold was due to the positive selling conditions at the time, followed by to reduce their total borrowings, and changing tenancy legislation making it too costly or hard to manage,” Ms McDougall said.
“These investor insights help to explain why so many investors – myself included – sold in Queensland because property prices were mostly stagnant there for years before the pandemic because of its underwhelming economy.
“So, after the moratoriums on rental evictions ended, and prices started to rise, investors offloaded their properties in the hundreds of thousands.”
The main reason investors may sell their property over the year ahead is because of the Queensland land tax, Ms McDougall said.
“The survey provided investors with more than a dozen potential reasons why they may sell a property in the next year – and the Queensland land tax was the top reason, with nearly 31 per cent of investors,” she said.
“Investors are also feeling like they have lost control of their real estate assets, because 29 per cent are considering selling a property because of changing tenancy legislation making it too costly or hard to manage, followed by the threat of losing control of their asset because of new or potential government legislation (27.5 per cent), and the threat of rental freezes being enforced by governments (23 per cent).
“If the percentage of investors who are considering selling winds up doing so, then we are going to see even higher rents as well as a sharp increase in homelessness – especially in Queensland.”
The survey also found that the buying intentions of investors continue to decrease with only about 58 per cent of investors believing that now is a good time to invest in residential property, which is down from 62 per cent in 2021, and down significantly from the 67 per cent recorded in 2020.
Ms McDougall said PIPA has been warning about the potential rental undersupply for five years now, but governments had repeatedly refused to listen.
“When we warned about the potential impact from lending restrictions on rental supply back in 2017, no one took any notice, and when we started highlighting the looming rental undersupply some two years ago, again, we were ignored as real estate zealots,” she said.
“It is clear that investors are sick and tired of being treated appallingly by policymakers who continually believe that they are an endless supply of revenue for their coffers.
“But when nearly 270,000 rental dwellings disappear in just two years – because governments thought private investors would forever shoulder the burden of providing rental housing while being taxed and taxed some more – well, have we got news for you.”