Investor activity in New South Wales has been on a decline since its peak in late 2014, according to CoreLogic. Has this worsened since the onset of COVID-19 outbreak?

Eliza Owen, head of residential research at CoreLogic, said investor participation over the decade averaged 41.9% across the state, achieving a peak in 2014 when investors comprised 55.6% of mortgage demand.

The level of activity from investors, however, has been decreasing since. In fact, investors’ share of overall mortgage demand in August 2020 declined to 27.4%. Owen said New South Wales' housing market fundamentals could explain the decline in investor participation.

CoreLogic data show that dwelling values in the state are 3.5% below the record high reached in July 2017. Meanwhile, gross rental yields were 3.23% in September, two basis points off the record low from October 2017.

"Across the state, returns to investors vary greatly by submarket in both the growth of the value of property assets and rental return," she said.

Over the COVID-19 period, rental markets, particularly in Sydney, were hit the hardest. Owen said the closure of international borders created a significant shock to the rental market of Sydney, much to the advantage of regional markets.

"Outer suburban and regional markets have seen upward pressure on rents, but the wind-back of stimulus to households affected by COVID, and cheaper rents closer to the city, may erode this growth over the coming months,"

The latest data from the Real Estate Institute of New South Wales (REINSW) showed an increase in vacancies in Sydney to 4.1%. Its inner- and middle-ring regions both reported higher vacancy rates at 5.5%

"Ultimately, the biggest boost to investor returns, and an uptick in investor activity, will be dependent on international travel resuming to Australia," Owen said.