Why investors are switching from residential property to the commercial market

Property investors are losing interest in the booming Western Australia residential market after significant price rises, and some are switching their focus to commercial property to better suit their budgets. These are two of the findings of the Australian Property Investor (API) magazine’s Q2 2024 Property Sentiment Report, which is based on a survey of investors, landlords, and property buyers.

The report revealed other interesting trends, including positive general market sentiment falling below 50 percent of survey respondents for the first time in 12 months; expectations of continuing price rises falling from 84 percent to 70 percent; and the intention to buy dropping significantly because an interest rate cut in the short term is no longer expected. Indeed, earlier this month, Reserve Bank Governor Michele Bullock indicated a rate cut within the next six months is unlikely.

The API report highlighted waning interest in Western Australia, which had the strongest growth in home values in FY24. The median home value rose by 23.6% to $757,399 in Perth and by 16.6% to $514,642 in regional areas, according to CoreLogic data. In Q1, 24 percent of investors rated the mining state as their preferred location for investment. This fell to 16 percent in Q2, which API says is one of the largest changes in sentiment it has ever seen across its quarterly surveys.

Interest in NSW rose by 6 percent to 26 percent in the second quarter. Growth in home values was comparatively moderate in FY24 at 6.3 percent in Sydney and 4.1 percent in the regions. Queensland remains the favourite investment destination among 33 percent of investors, up from 32 percent in Q1. Home values rose by 15.8 percent in Brisbane and 12.2 percent in regional Queensland in FY24.

While residential property remains the most popular type of bricks-and-mortar investment that buyers are considering purchasing over the next year, the survey revealed increased enthusiasm for commercial property. In the second quarter survey, 13 percent of respondents said they wanted to buy a commercial property over the next year, up from 7 percent in the first quarter.

“This near-25 percent decline in just three months is an extension of a downturn that has been taking place since the Q4 2023 survey, when houses were at 45 percent,” according to the API report. “As affordability concerns mount, detached homes are now out of reach for many. The increasingly publicised strong performance of commercial property, particularly industrial assets, along with easier access to this investment vehicle through a proliferation of fund and syndicate offerings, has put commercial firmly on the radar of investors.”

Among those still targeting residential property, interest in standalone houses dropped from 39 percent in the first quarter to 30 percent in the second quarter. Interest in apartments increased slightly from 23 percent to 24 percent, and interest in townhouses and villas was steady at 18 percent.Investors also signalled a renewed interest in building, with 10 percent of respondents now intending to buy vacant land, up from 5 percent last quarter.

This may be a reflection of construction costs easing after years of unprecedented growth. The cost of building a typical home rose by just 0.5 percent over the past 12 months, according to the latest CoreLogic Cordell Construction Cost Index report. This was the slowest growth in 22 years. “The growth in costs has finally returned within normal margins, however the price of construction is not falling and building or renovating remains almost 30% more expensive now than pre-COVID after an extended period of escalating costs,” said CoreLogic research director Tim Lawless.

Property has always been about more than buying and selling. A home can represent a fresh start, a long-term investment, an architectural idea or a connection to a particular neighbourhood. Even when people are not planning a move, many still enjoy following the market, researching local areas and discovering the stories behind remarkable homes.

Atlas Real Estate is responding to that wider interest by creating more ways for people to engage with property. Bringing listings, market information, local perspectives and lifestyle stories together, Atlas offers a destination for anyone curious about homes and the communities surrounding them.

It reflects the reality that people approach real estate with different needs and motivations. One visitor might be actively searching for a new home, while another may want to understand recent results in their suburb. Others might be keeping an eye on changing market conditions, exploring an unfamiliar area or simply appreciating thoughtful architecture and premium residential design.

At atlas.com.au, those interests meet in one place. Visitors can browse properties for sale and recent results, while also exploring market insights, featured homes, local stories and introductions to the people behind Atlas. The result is an experience designed to remain relevant before, during and after a traditional property transaction.

“We’re reimagining real estate around how people actually engage with property today — bringing together market insight, exceptional homes, local perspective and lifestyle in a way that feels more relevant and useful,” says Michael Coombs, Director of Atlas Real Estate.

That approach recognises that an interest in property rarely begins on the day someone decides to buy or sell. A future buyer may spend months learning about suburbs, monitoring prices and refining their sense of what they want. A homeowner might follow nearby sales to understand the changing value and character of their area. An investor may be looking for broader market context, while a design enthusiast may be drawn to an exceptional renovation or a distinctive piece of architecture.

By accommodating those different forms of curiosity, Atlas aims to make engaging with real estate feel less transactional and more connected to everyday life. Property is shaped by its surroundings: the streets, businesses, landscapes and people that give a place its identity. Understanding a home therefore means looking beyond its floor plan or sales history to consider the lifestyle and community that come with it.

This broader perspective also gives local stories a meaningful role. Suburbs are constantly evolving, influenced by new businesses, changing demographics, design trends and the people who choose to make them home. Content that explores these forces can help readers build a richer understanding of an area, whether they are preparing to move there or simply want to stay informed about their own neighbourhood.

The same is true of market information. Sales results and property data are most useful when they are accessible and supported by context. Bringing recent results together with insights and local knowledge can help people follow the market on their own terms, without suggesting that every visit must lead immediately to a transaction.

For Atlas, this thinking forms part of “Real Estate, Reimagined”, its broader brand campaign focused on using brand, creativity and technology to deliver a more relevant, useful and human real estate experience. Rather than treating technology as an end in itself, the emphasis is on how it can make property easier and more engaging to explore.

That human focus matters because real estate decisions are often closely tied to significant moments in people’s lives. A move may be connected to a growing family, a new job, a change in lifestyle or a long-held ambition. Even outside those milestones, homes and neighbourhoods remain a source of interest because they reflect how people live and how communities develop.

Atlas’s approach makes room for both the practical and aspirational sides of that interest. Readers can seek out information with a clear goal in mind or browse simply because a property, place or story captures their attention. In either case, they can move easily between homes, results, market perspectives and local inspiration.

The ambition is not to redefine why people care about property, but to reflect the many reasons they already do. By combining useful information with engaging editorial content, Atlas is creating a place for buyers, sellers, homeowners, investors and the property-curious alike.

Whatever brings you to property, discover more at atlas.com.au

Why investors are switching from residential property to the commercial market

Cashed up Australians are showing greater enthusiasm for the commercial sector as interest shifts from the home market

Atlas Real Estate is reimagining how people connect with property, combining listings, market insights, local stories and lifestyle content in one destination for those buying, selling or simply exploring the market.