Cause and effect is a well know law of relationships. In 2020, there was an almighty cause, which brought an incredibly response across political and social landscapes.
But another lesser-known law is, “If you’re going to throw a party you’ve got to expect a little damage.”
In other words, things implemented to bring about one set of results invariable encourage others.
So it goes with moves by governments at all levels to help boost the economy and the building industry in the wake of COVID-19.
You see, a few moves by our politicians are also driving a buyer group I first spotted a few years back – and as a result, their numbers will be on the rise in 2021.
About four years ago I was analysing data about our investor clients and their assets. It included elements such how far they lived from their investment and how long they’d owned their property before commissioning our services.
Among the very interesting statistics revealed was one standout – and I’ve been watching its progression ever since.
It’s the rise of the ‘accidental investor’.
In short, I identified the percentage of people who had first lived in their asset before moving house. They’d retained that original home as part of an investment portfolio rather than sell it.
In most cases, these owners bought their first home for the usual reasons. Maybe it was close to family, or great schools, or a workplace.
But for whatever reason, when the time came to shift, they were able to keep the property and find tenants, thus becoming investors without the initial intention of buying real estate as an asset.
In 2018, I found that around 23 per cent of investors had once lived in their investment property, with owners living in their former home for four years and 11 months on average before moving out and flipping it into their portfolio.
Then at the beginning of last year I published our 1000 Assets (2020) report which was a four-year study of investor behaviour.
The information revealed for data analysed between April and December 2019, the percentage of accidental investor had risen slightly to 25.7 per cent of landlords, with the average occupancy falling to four years, two-and-a-half months.
In short, accidental investor numbers were rising, and their initial occupancy period was falling.
The new trend in 2021
While there’s been a definite trend toward accidental investment throughout the past five years, I believe the numbers in 2021 will show an exponential rise.
And, this time, it will be no accident.
In a recent news article, property investment advisor Richard Crabb, said a new cohort was on the increase.
He said the ‘livevestor’ had spawned.
Livevestors are a cohort who are buying their home (usually their first) with the express intention of it becoming an investment in the future. As such, they purposefully move their property selection criteria away from the usual homebuyer checklist and, instead, look for long-term investment potential in their first house.
In short, they’re not-so-accidental investors.
Here’s why we’ll see the numbers skyrocket in the near future.
The introduction of the HomeBuilder stimulus by Federal Government has been a huge success. The building and development industries are singing its praises as employment and activity in the new-build property sector goes ‘boom!’.
In addition, there are a range of state and territory incentives, from first homeowner grants to stamp duty discounts, that have taken home buying assistance to record levels.
On top of this, low interest rates designed to keep our economy improving in the post-pandemic world are boosting the buying power of purchasers, as loan serviceability \ becomes ever easier.
This confluence of factors is about to spawn a new wave of accidental (on purpose) investors. They will drive markets in city fringe high-rental-demand suburbs with excellent long term value growth prospects.
These buyers will choose to stay in their home for at least 12 twelve months (the minimum usually required in order to qualify for various grants). But many will decide to move out soon after the year is up and make plans to upgrade their abode while retaining their first purchase.
When we next visit our study, my bold prediction is that the ‘Accidental Investor’ number will be over 27 per cent, and in-residence time will be between two and three years – and it’ll just be the beginning.
Accidental Investors are on their way and set to become a cohort of influence that will be hard to ignore in Australian property markets.
Mike Mortlock is a Quantity Surveyor and Managing Director of MCG Quantity Surveyors. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating. You can visit them at www.mcgqs.com.au Mike Mortlock is a Tax Depreciation expert, Quantity Surveyor and Managing Director of MCG Quantity Surveyors. He is a regular speaker and commentator having been featured in the Financial Review and Sky Business. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating for investors. You can visit them at https://www.mcgqs.com.au