'Bugging out': The new property investment trend for 2022

Investors in residential property will increasingly buy rental homes and opt to live there for periods over 2022 themselves, many experts believe.

The new phenomenon of having a “bug-out” place – somewhere to retreat to in the case of emergencies, like COVID lockdowns – are likely to be uppermost in most investors’ minds over the next year.

“What we have discovered is that a quarter of people are now living in their property before they rent it out as an investment,” says Mike Mortlock, the director of MCG Quantity Surveying.

“This is so interesting as, in some respects, even though property advisors would say this is a poor investment strategy, this is happening more and more. People like to have a spread of options so they can disappear to somewhere else, like an investment property, if something goes wrong.”

The national director of group risk and compliance at valuers Herron Todd White, Kevin Brogan, has also seen the emergence of this new phenomenon and predicts it will continue through next year.

“We’re seeing this crossover between rental property and owner-occupied property,” he says.

“People are buying investments, and then choosing to live there for two to three months – perhaps in a more conducive environment than their own homes that are closer to their work – as a “workstation”, and then rent them out the rest of the year.

“The nexus between work and the office has been broken to a degree and we’re now seeing dual-purpose homes that the owners can use but also rent out.”

Property prices will continue to rise in 2022, but not at the same rate as this year, most predict.

Although no one yet knows the extent of the macro-prudential tightening on lending that will take place, and how soon the Reserve Bank might raise interest rates, there’s still plenty of fat built into the system to allow most investors peace of mind.

“We haven’t had an interest rate rise now for 11 years,” says Peter Koulizos, chair of Property Investment Professionals of Australia.

“But if the banks are comfortable with rates rising, then we should be too.

“Australian residential property is very resilient, which you can’t say of some commercial property. But we will see a continued movement away from Sydney and Melbourne to cities like Adelaide, Hobart and Brisbane, and to the regions.”

Brisbane is also a favourite pick for 2022 for Mortlock.

“There’s still an affordability price point there and people have been saying for 10 years that Brisbane will be the next to boom because the salary-to-price ratio is good. But it never happened,” he says.

“Brisbane could happen in 2022, though, as another aspirational bug-out plan.”

Investors are likely to feel more comfortable about buying properties outside Sydney and Melbourne as tenants, too, take a post-pandemic look at their lifestyles, and feel happier living out of inner cities or in regional and coastal locations.

“People now have a different lens on location, location, location,” says Brogan.

“They’re now looking for different things in a home, and are willing to live further out for the sake of more space to work from home, like an extra bedroom.”