Investors are selling up but some do it better than others
Investors are selling up and it spells bad news for the rental crisis but opportunities exist for savvy investors willing to move against the flow of the herd, while sellers can also benefit from improving the sales process.
Investors are selling up and it spells bad news for the rental crisis.
Fresh data from CoreLogic shows that a significant portion of listings are originating from investors selling their investment properties.
The historical ten-year average sits at 25 per cent, compared to a whopping 32.7 per cent of listings that now comprise investment properties.
Not only is this disproportionate, it suggests that our rental crisis is likely to worsen.
What could be driving investors to sell?
The interest rate increases are an obvious guess. The cost of holding a property has increased markedly for investors since the cash rate started rising in May 2022.
From the all-time lows of the Covid lockdown period, any cash rate increase was bound to be a deterrent for investors.
Investor disincentives aplenty
However, interest rates aren’t the only driver of this change we’re seeing in listing activity.
State-based land tax reforms have caused some concern for investors. Queensland’s land tax changes were ultimately repealed after three months, and while it could be argued that no investors were actually financially impacted by the land tax itself, the mere threat of the tax changes initiated a significant amount of panic-selling in 2022.
Victoria’s newly announced ‘temporary’ tax changes have created some discussion in property circles too, and some investors are choosing to find alternative states to invest in.
But aside from the land tax reforms and heftier mortgage repayments, it is the onerous rental reforms that are leaving investors feeling disincentivised.
From expensive fixes in response to tough minimum standards, an inability to say no to pets, to the removal of the ‘no-reason notice to vacate’ clause, property owners are largely feeling disempowered when it comes to controlling their asset.
In response, many investors are choosing to sell and replacing their property portfolio with shares instead.
When renters and landlords clash
So what does this mean for agents, buyers and renters alike?
Now that around one third of listings are rental properties, renters and agents are all too familiar with the rules and processes when it comes to sales campaigns and open for inspections.
Renters are entitled to a notice period when agents are proposing inspection times, and those on fixed leases are able to securely stay in their home until their lease expires.
However, for buyers’ the purchasing experience can be quite different to an owner-occupier sale.
Firstly, access to view the property is not always easy. While some renters are obliging and present their home well, plenty don’t.
Agents are often working to tight timeframes and small windows of opportunity when it comes to showing prospective buyers through a property.
Photos don’t always look dazzling, particularly if a renter has curated a messy look in the property.
And occasionally, renters are hostile. This is somewhat understandable, especially when the sale was not anticipated. Packing up and vacating is stressful at best, and in this tight vacancy climate, a notice of intention to sell can be particularly distressing for a renter.
But for a vendor who is trying to sell a hostile renter’s home, the campaign can sometimes unravel quickly and yield a terrible sales result.
Does the investor exodus present opportunities?
Buyers who can see past mess, those who can withstand an angry tenant sitting in on the inspection, and buyers who can satisfy themselves with a limited number of inspections are the ones who are in the box seat when it comes to purchasing a rented property that has its challenges.
Importantly, those who can take on a lease for the short term will separate themselves from those who want immediate vacant possession.
Too many buyers reject rented properties because they are either anxious about taking on a tenancy or they have concerns about their loan and possible first home buyer entitlements.
It's critical that buyers talk to their strategic mortgage brokers or to their bank before rejecting a property with a lease in place. Sometimes the toughest campaigns can yield the best deals.
Keeping a tenant on-side can make or break the success of a sales campaign.
Recognising the imposition and the stress caused is important, and graciously thanking them for helping with the success of the campaign can go a long way.
From a kind gesture like a hamper, to rental reductions, a helpful tenant cannot be taken for granted. In addition, providing a great reference for them as they embark on finding a new home could prove valuable.