Why are so many landlords selling? Is there a better way?

The most recent annual investor sentiment survey revealed Victoria was the least attractive state for property investors in the nation. Rising land taxes were the top concern for landlords, along with interest rates and tenant headaches. Unsurprisingly, there has been an increasing number of landlords selling over the past quarters. “Property investment is no longer what it used to be,” sighs Leanne, explaining her decision to sell a villa unit in Mount Waverley.

In the 12 months to March 2024, strong sales activity was driven by state capitals. Sydney’s sales volume increased by 17%, followed by Melbourne’s 8% compared to the previous year. Regionals, on the other hand, had a much smaller increase, just above 1%.

Source: CoreLogic

Australian residential property is the “home of capital growth”

“House prices have doubled roughly every 10 years for many decades in Melbourne and Sydney. If population growth and urban concentration in our top 3 cities persist, we believe that there continues to be potential for good capital growth from investment in quality residential property”, says Evan Thornley, LongView’s co-founder and Executive Chair.

It’s important to consider, however, that while prices have had a compound growth of 7% per year on average, performance varied substantially between properties. For example, Robust Older Dwellings on Well Located Land (RODWELLs) have consistently outperformed high-rise apartments. In other words, selecting the right asset is critical, as a rising tide doesn’t lift all boats.

Australian properties deliver relatively low rental yield

Even though Australia is a relatively low-yield market compared to other developed countries like the US, most investors rely on rental income to cover the mortgage. In the context of rising holding costs, many are under significant pressure to sell. Given some market analysts’ concern that more interest rate rises might be inevitable to contain inflation, mortgage holders are bracing for further impact.

In addition to the financial aspects, property owners face continued levels of new regulation, both in terms of minimum property standards and increased tenancy rights, so there is little doubt that being an investment property owner is becoming increasingly difficult. “I’ve just had too much headache being a landlord,” laments Anna, one of our clients who recently decided to sell her unit in Port Melbourne.

Are there better ways to invest in property?

Substantial costs and hassles for property owners have pushed many of them to sell. Yet, at the same time, the fundamentals for strong capital growth in property (doubling every 10 years), the primary reason most people invest in property, are as strong as ever.

“That’s why we’ve developed the LongView Homes Investment Fund,” says Evan. It allows investors to access a portfolio of quality family homes without the costs, taxes, and hassles of being a landlord”.

Our clients often describe their main reason for investing in property as “safety.” They have built wealth from their own family home and expect to achieve similar results from their investment properties. But, in reality, over 70% of Australians own only one investment property. “Without the diversification of a portfolio and the expertise to select the right assets, it is actually a roll of the dice for them,” comments Evan. “Our Fund aims to combine the best of both worlds by addressing these issues.”

As one of the Fund’s most recent landlord investors stated, “I wish something like this existed when I started my property journey.”

If you’d like to have a 1:1 chat about the Fund, click here to book a meeting.