Source: CoreLogic
Hey there, property enthusiasts! Today, let’s dive into a hot topic making waves in the real estate world: tenancy reform and its effect on property investment trends. With headlines buzzing about new laws and investor fears, it's time to separate fact from fiction and understand what's really driving changes in the market.
Capital Growth Markets: The Real MVPs
First off, let's talk about the shining stars—capital growth markets. Despite whispers that rental reforms would scare off investors, these markets have shown impressive resilience. Take Western Australia (WA), for example. Even with 'no grounds' evictions still on the table, WA has seen a boom in investor activity. Over the past few years, WA has attracted a higher share of investment loans, thanks to its stellar capital growth. Interestingly, this high investment activity hasn't slowed down WA's rental growth, which is the highest in the country.
One key insight is the relationship between investor lending and housing market returns. When home values soar, so does investor activity. For instance, the peak in Australian home value growth in late 2021 led to a surge in investment finance by early 2022. It’s a clear case of investors chasing high returns, rather than being scared off by tenancy reforms.
South Australia: Despite announcing a ban on 'no grounds' evictions last July, new investment property finance has been on the rise, up around 37% by May 2024. Investors are clearly more interested in capital growth than rental laws.
Australian Capital Territory (ACT): Investor activity has dipped since its ban on 'no grounds' evictions in April 2023. However, this likely has more to do with weaker capital gains and potential oversupply, rather than the reform itself. Rent values have only increased slightly, by 1.3% from April 2023 to June this year.
WA's story is particularly interesting. With 'no grounds' evictions still allowed, investor activity has skyrocketed, with new investment loans up 53% year-on-year as of May. Yet, this hasn’t alleviated rental market pressures. Rents in WA have climbed faster than anywhere else in Australia, up 12.8% over the past year. This suggests that factors like population growth and capital returns are driving the market more than tenancy laws.
So, will tenancy reforms really deter investors and push up rents? The evidence suggests otherwise. While these reforms might reduce flexibility and potential rental income for landlords, they are unlikely to significantly impact overall investor activity or rent values. Instead, market dynamics like population growth, household income, and capital growth prospects will continue to play the dominant roles.
In conclusion, tenancy reforms are set to support greater security for tenants, balancing the power dynamic without drastically reshaping the investment landscape. For landlords and investors, the key takeaway is to focus on broader market conditions and long-term capital growth rather than getting caught up in the noise around tenancy laws.
Until next time, happy investing and keep an eye on those capital growth trends! 🌟
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