The next investor hotspots

While many investors are taking the opportunity to bank big price gains and sell up their properties, the appeal of rising property prices, increasing rents and more certainty around interest rates is pulling landlords back into the market.

New data shows investor enquiries on realestate.com.au have surged 64% year-on-year in the local government area of Knox, a leafy municipality at the foothills of the Dandenong Ranges, around 20 kilometres southeast of the Melbourne CBD.

Email enquiries from investors more than doubled year-on-year for properties in Perth’s Armadale, while Sydney’s Willoughby (61%) on the affluent lower north shore, Burnside in Adelaide (79%), and the Isaac region in Central Queensland (64%) also recorded a strong jump in demand over the year.

Investor enquiries have surged in suburbs across Sydney's lower north shore. Picture: realestate.com.au

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Analysis of the PropTrack data shows a common theme among the LGAs: weekly rents have grown faster than their respective capital city or region, and property prices either fell or underperformed over the year, but are now showing early signs of outperformance.

Where landlords are looking

With a median sales price of $852,000 over the year to August, Knox includes the Melbourne suburbs of Bayswater, Boronia, Ferntree Gully and Knoxfield.

Despite a 5.3% fall in the median sale price over the past 12 months, prices across the LGA are now back on the rise with the pace of price growth outperforming Greater Melbourne in the past quarter. Weekly rents have surged 14.6% year-on-year.

Ray White Ferntree Gully partner and sales agent Jack Rickard says the area’s proximity to Melbourne is a strong investment drawcard.

“You're at the base of the Dandenong’s so you kind of get the country feel but not being very far away,” he said.

 “You get good returns on investments, investors are getting full size blocks and whatnot, but it also appeals to all type of buying - units, townhouses, apartments.”

Investor enquiries have spiked in Knox, located at the foothills of Victoria's Dandenong Ranges. Picture: realestate.com.au

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With 2000 rentals on his office’s books, Mr Rickard says the area has seen good growth in recent years.

Victorian areas with the largest year-on-year growth in investor enquiries

After skyrocketing during the pandemic, investors may now be seeing a buying opportunity in the blue-chip LGA of Willoughby on Sydney’s lower north shore, which has pulled back by more than 20% year-on-year.

But in the past quarter, the median sale price has turned around, rising nearly 10%, while weekly rents have surged 16.1%.

Belle Property Lane Cove principal James Bennett says rental demand has jumped by around a quarter for two-bedroom units within the suburbs of Lane Cove and Willoughby and says the area’s proximity to the city was a drawcard for investors.

“These areas like Lane Cove, they have the big bus interchange which goes from Macquarie, Chatswood city, which has literally one turn onto Willoughby Road and straight into the city, you know in five minutes and you've got a direct bus route straight to the city,” he said.

St Leonards in Sydney's Willoughby LGA is well connected to the CBD. Picture: realestate.com.au

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“I do think there's possibly some investors looking to get in, and also some that I think are looking to get out.

“There's a little bit of stock coming on the market, a little more stock than we've seen previously and I think that's partially where some investors are holding properties with interest rates that have obviously drastically changed in society that they're no longer as viable as they were before.”

NSW areas with the largest year-on-year growth in investor enquiries

In Queensland, the top five LGAs with the biggest increase in investor enquiries were all located in regional areas, with Isaac (64%), Livingstone (47%), Central Highlands (46%), Mackay (43%) and Gladstone (38%) all seeing a strong lift in demand.

Investor enquiries have surged across regional Queensland, with separate ABS data showing a jump in investor lending. Picture: realestate.com.au

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REA Group director of economic research Cameron Kusher says the data, showcasing regional Queensland, is a reflection of the good rental returns gained in country and mining areas.

“People are starting to look back into those mining towns, and prices are still significantly lower than they were pre the crash in those markets,” he said.

Queensland areas with the largest year-on-year growth in investor enquiries

Investor loans picking up

It comes as recent data from the Australian Bureau of Statistics revealed the value of new investor housing loan commitments in Queensland grew 6.8% to $1.9 billion in July, and have risen 31% since February 2023.

While investor lending has been trending higher nationally since February, it remains 7.2% lower compared to a year ago.

“We have seen a bit of a pickup in lending to investors, pretty much only over the last few months since February,” Mr Kusher said.

“The fact that interest rates have been moving every single month, and also coming off very strong price growth, until the start of this year prices were falling, rental yields, in most places -  not every place – were pretty much at record low levels, and I think that uncertainty has really dented investor confidence.”

The return of confidence among investors has been split amongst the states, Mr Kusher says.

“Rental yields you can get in Perth, WA, for example, are really strong,” he said. “You can get sort of 6% gross rental yields, plus prices are still rising at a fairly rapid clip."

“Whereas somewhere like Sydney and Melbourne, rental yields are pretty much at historic lows. You probably wouldn't invest for rental return, you'd be investing for the capital growth potential if you're coming into those markets.”

WA areas with the largest year-on-year growth in investor enquiries

Mr Kusher says investors that are confident to enter or re-enter the property market now face significant serviceability hurdles, with borrowing capacity down around 30% since May 2022, coupled with higher repayments and other upfront costs.

Originally published at: https://www.realestate.com.au/news/the-next-investor-hotspots/