New data from research by Resolve Finance, a mortgage broker and finance solution firm, has revealed as many as 19% of investors plan to sell an investment property in the next 12 months.
Currently, about 2.28 million Australians own an investment property, accounting for about 30% of the country’s 11 million privately owned residential homes.
A year of interest rate hikes, regulatory and lending changes, and the debate around capital gains and negative gearing, have introduced high levels of uncertainty into the investment property market.
On the other hand, 61% of investors intend to weather the high interest rate storm and continue renting to private markets.
A smaller 8% subset also intend to hold their properties but will rent to short-term markets in a similar model to Airbnb, and 3% are considering making the transition from long-term to short-term renting.
An unsettled market
The Australian Prudential Regulation Authority (APRA) has muddied market waters, introducing a benchmark of 30% of new lending under interest only (IO) conditions in recent years.
Previously as many as 65% of investors had IO loans, marking a shift from prevailing conditions into a tighter lending market.
Despite being relaxed in 2018, the knock-on effect required banks to increase capital requirements for this type of lending, leading to higher interest rates and a higher bar to refinancing.
"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,” Resolve Finance managing director Don Crellin said.