oes the increase in investor lending indicate an improvement in rental supply

shortage of properties

Does the increase in investor lending indicate an improvement in rental supply?

According to REIWA President Joe White, the growing participation of investors in the market is a positive development. With Western Australia's rental market experiencing significant tightness, the addition of every rental property is crucial.

Investor activity in the property market surged in 2023, with the number of new housing loans to investors increasing by 10.4 percent compared to 2022 and a significant 37.3 percent higher than 2021, as per the latest lending data from the Australian Bureau of Statistics.

Monthly loan figures reached a peak of 2,211 in November, marking the highest on record.

The growing participation of investors in the market is indeed a positive development. With Western Australia's rental market experiencing significant tightness, the addition of every rental property is crucial.

Unfortunately, our data does not yet indicate an increase in the number of rental properties. There are various factors at play beyond just a rise in lending figures, including the types of properties investors are purchasing, their intentions, and the actions of existing investors.

Firstly, it's important to note that existing investors are still selling properties. The new investors highlighted by the increased lending figures are essentially replacing those investors and maintaining, rather than increasing, rental supply.

Our members have observed significant interest from investors based in the Eastern States. However, some of these investors are purchasing properties in WA with the intention of relocating here in a year or two. This would subsequently remove a property from the rental pool.

In comparison, the number of loans for existing properties saw a more modest increase of just 5.9 percent.

However, when you embark on your home search, readiness to act is essential.

Similar to our members, builders and developers have also reported robust sales to investors from the Eastern States.

The increased sales in construction to investors, whether they're from the Eastern States or within WA, is positive news overall. It will eventually contribute to adding new homes to the overall housing supply and will also bolster rental supply. However, it's important to recognize that this process will take time.

In the best-case scenario, these homes will enter the market in approximately a year, while in the worst case, it may take considerably longer.

Additionally, it's crucial to consider the intentions of these investors. Some may eventually relocate to Perth, at which point the property will no longer be available for rent. There's also the possibility that these investors may opt to sell the homes upon completion to capitalize on potential capital growth.

Before we witness a significant improvement in the rental market, we'll need to see ongoing growth in investor figures, the completion of homes currently under construction, and a decrease in the number of investors exiting the market.

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