Investment properties on the chopping block as rates rise

New listings for investor-owned residential properties have nearly doubled nationwide since December, as some landlords may look to offload assets to ease the pressure of the rapid interest rate rises.

Tim Lawless, CoreLogic research director, said the share of investor-owned listings was still lower than last year’s peak when it accounted for 35 per cent of all stock, but has climbed higher than the long-term trend. Across Melbourne, ex-rental listings have more than doubled to 2114 and in and the ACT, they have climbed to 219, while the other state capitals had listings increases of between 41 per cent and 80 per cent in the same period.

“Most landlords are not desperate yet, but they are increasingly worried about their budgets, so they are looking to pay off some debts. Investors are not attached to their investment properties, so during a crunch, these assets are the first to go.”Victor Kumar, Sydney-based investor and founder of buyer’s agency Right Property Group, said new investors were likely to struggle the most, particularly if they have not budgeted for those rate rises.

Uncertainties and fear of further interest rate rises could also be prompting investors to sell now before their conditions worsened, said Margaret Lomas, founder of Destiny Financial Solutions. “Investors with low debt levels would be in a prime position to benefit from higher rental returns, but the reality for a highly leveraged investor is the rise in the cost of debt is likely to be outweighing any additional income derived from higher rents,” Mr Lawless said.

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