Property investors shift focus as NSW falls out of favour – report

Investors prioritise retirement planning and rental yields as interest rate concerns and affordability challenges reshape the market

Property investors shift focus as NSW falls out of favour – report

New South Wales has slipped off the radar for many property investors, while rental yield expectations have reached new heights, according to a new report.

“New South Wales’ property prices tower above those of other states, and that affordability crunch is finally deterring prospective buyers and inciting more property owners to sell up and cash in,” said Craig Francis, editor of Australian Property Investor (API) Magazine, commenting on the API Property Sentiment Report for Q4 2024.

The report, which gathered responses from hundreds of readers on property market trends, highlighted key challenges and shifting priorities influencing investor sentiment as Australia transitions into a new year.

“The property market in 2024 was characterised by a slowing or reversal of capital growth rates around the country, as affordability concerns dampened buyer enthusiasm even in the face of a chronic housing supply shortage,” Francis said.

While 69% of respondents expect property prices to rise nationally in 2025, confidence in regional property growth has waned, with only 59% anticipating price increases in these areas. Queensland remains a standout performer, with strong investor interest and notable price gains. Meanwhile, the disparity between cities has widened. Brisbane, Adelaide, and Perth recorded growth of 11–19% in 2024, while Sydney saw just a 2.3% uptick and Melbourne prices fell by 3.7%. 

The survey also revealed a growing preference for houses over other property types, with less interest in units, commercial property, or rural investments.

The API report also indicated that the rental market was undergoing significant change. Only 21% of landlords said they would consider losing a good tenant in pursuit of higher rental returns — a sharp drop from 47% two years ago. This restraint comes amid soaring rental yield expectations, as demand continues to outstrip supply in many markets.

The housing supply shortage has become a major concern, pushing it higher on the list of factors influencing real estate decisions. This shift could be driving another key trend: the growing focus on long-term goals. 

Respondents are increasingly adopting a retirement-focused strategy, with nearly double the proportion of investors prioritising retirement planning compared to the previous quarter. Historically, buying an investment property dominated as the primary goal, but the sentiment now suggests a more cautious, future-oriented approach.

“In just three months, the proportion of respondents stating their main property goal is to position for retirement has almost doubled,” Francis said. “Respondents now appear to be taking a longer-term view.”

Although investor enthusiasm has cooled, with less than half of respondents feeling positive about the market, buying intentions remain strong. The survey revealed that more people are planning to purchase property in the next 12 months than at any point since mid-2022.

This optimism persists despite the moderation or decline in property prices across major markets, elevated interest rates, and ongoing cost-of-living pressures.

“Despite the cost-of-living pressures, borrowers did also indicate that repayment burdens are less onerous than they have been for a year,” Francis said.

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