Savvy property investors return as pandemic-induced “property hysteria” subsides

Propell Property Managing Director Michael Pell has observed that the volume of property investors active in the market has fallen dramatically over the past two years, with savvy operators returning now that the record low interest rate-induced “property hysteria” has passed.

According to the Australian Bureau of Statistics Lending Indicators for March, the number of new loan commitments for investors has dropped nearly 22 per cent in the past two years.

Mr Pell noted that government schemes such as HomeBuilder and super low interest rates had dramatically increased the usual volume of new property investment activity during the pandemic.

“It’s important to understand the difference between the number of investors and the value of their activity as this clearly shows that investment activity has returned to more historical averages,” Mr Pell said.

He added that the overall property buying activity was supercharged during the pandemic, but with the cash rate now 425 basis points higher, owner-occupier activity has also reduced.

“The emergency interest rates during the pandemic resulted in a once in a lifetime property buying frenzy with owner occupiers and investors bringing forward their purchasing plans to take advantage of the cheap money on offer,” Mr Pell said.

“Those days are done, so, we now have market conditions that are more stable and sustainable – but perhaps not as exciting as they once seemed – which is actually the perfect time for investors to strike with the most educated ones currently doing so.”

Seasoned investors are looking past short-term cash flow considerations due to higher interest rates and are making the most of the reduced property investment buying activity, especially those with budgets between about $700,000 and $1.5 million, according to Mr Pell.

“They have sat out the herd mentality that was prevalent a few years ago and waited patiently for the opportune time to re-enter the market when there were fewer competitors and less overall property hysteria,” he said.

The 2023 PIPA Annual Investor Sentiment Survey revealed that about 55 per cent of investors believed the next 12 months would be a good time to buy, with seasoned investors seeking opportunities across South East Queensland, in regional and coastal areas of New South Wales, as well as in Melbourne.