Investor loans have been trending upwards for the past few quarters and are now above the five year average. This is contributing to an increase in rental supply and a moderation of rent prices, which is welcome news for renters.
According to new lending data from the Australian Bureau of Statistics, investor loans fell slightly (4.5%) from the September to December 2024 quarter but are 13.2% higher compared to the December 2023 quarter.
The number of loans to investors has been on the rise since the March 2023 quarter and are now at some of the highest levels since mid-2022.
This is in contrast with the trend seen at the beginning of the pandemic. The uncertainty in the market at that time, combined with reduced demand for rentals due to closed borders, resulted in an exodus of investors.
From early 2022 to early 2023 when there were ten consecutive interest rate hikes and a decline in borrowing capacities, many investors exited the market as well.
Subdued activity from investors saw challenging conditions in rental markets. At the same time, population growth outpaced new home construction, causing rental vacancy rates to fall, competition to increase and weekly rents to surge.
However, the recent uptick in investor activity has brought a positive shift for renters with new rent listings increasing in the majority of our capitals as a result.
The rise in new listings has contributed to an overall increase in the number of properties advertised for rent. This has, in turn, encouraged renters to relocate more willingly and likely improved rental turnover rates, creating a cycle that further boosts new listings.
Renters now have more choice than they did a year ago. Securing a property has also become less competitive, especially with slower population growth and the increased adoption of share housing to offset rising living costs.
Rent price growth is moderating in response to these changes, with prices increasing by only 5% in the past year. This has provided renters with a respite, following substantial annual increases of 17% in January 2023 and 13% in January 2024.
Looking ahead, if rental supply continues to trend upward and demand softens further, the market is likely to become more balanced. Rent prices may rise at a slower pace or remain stable, which would ease the financial burden on renters even further.
