Too hot to handle? One in five property investors to sell in 2024

Higher interest rates could push a significant portion of Australia’s property investors to sell a property over the coming year, according to new mortgage broker research. 

How many investors are selling next year? 

Research from Resolve Finance has found that 19% of Australian investors are planning to sell an investment property over the next 12 months, with an additional 9% planning to renovate and ‘flip’ their properties.

However, it was also found that 61%  of investors will ride out the current high-rate environment and continue renting to the private market. Of these landlords, 8% intend to continue offering short term rentals such as through Airbnb, while 3% are considering transitioning from long-term private market tenancies to short-term Airbnb-style rentals.

To put this in context, data from the Australian Taxation Office (ATO) has shown that around 20% of Australia's 11.4 million taxpayers own an investment property, and slightly more than 30% of Australia's 11 million private residential dwellings are considered property investments.

Why are investors selling?

With the Reserve Bank of Australia (RBA) having raised the national cash rate 13 times since May 2022, mortgage interest rates have risen significantly, pushing up home loan repayments for both owner occupiers and investors. It’s also not yet certain if the RBA is done raising rates. 

Additionally, stricter limits on interest-only home loans required by the Australian Prudential Regulation Authority (APRA) between 2017 and 2018 are continuing to be felt in the investor market, with increased capital requirements for this type of lending leading to higher interest rates.

Resolve Finance managing director, Don Crellin, said:

"With interest rates rising sharply, regulatory changes making it more expensive for investors to access interest-only loans, and changes in the serviceability assessment a significant proportion of borrowers are likely to have either been unable to refinance or faced significant increases in their repayments. With all this in mind, it's crucial for investors to navigate the lending landscape effectively.”

What steps can investors take?

Australian homeowners, including both investors and owner occupiers, may be facing additional price pressure from rising interest rates, high property prices, and the cost of living crisis. Depending on your financial situation and personal goals, you could consider selling your property or refinancing your home loan.

Getting a more affordable home loan interest rate could be as simple as contacting your mortgage lender to negotiate a rate cut. You may be surprised by what some lenders may be willing to offer to retain your business.

If your current lender can’t or won’t come to the table, you could investigate options for refinancing your mortgage. Be sure to look beyond just the interest rate and consider the overall value offered by different lenders, including the fees, features, and other benefits.

If you’d like more help comparing home loans and working out some of the best options for your unique situation you could consider contacting a mortgage broker. These home loan experts can recommend specific home loan options from a range of lenders, potentially including exclusive offers that aren’t typically advertised elsewhere.

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