Strong rental returns is one reason why investors are being lured back into the property market after many sold for capital gain 12 months ago when values were up 20% plus year-on-year.
The real estate picture is not precisely the same as many investors left it – properties values are higher but interest rates are edging up with many predicting the Reserve Bank’s target cash rate will hit 3% in 2023.
Against these dynamics, however, are decade-low vacancy rates and record-high rental returns.
As an experienced agency, we believe the market needs investors and landlords back in the game because the lack of rental properties is becoming a social issue.
As a business with a strong property management team, we’re in a great position to help investors find quality, reliable tenants and also take away the burden of maintenance.
According to the research firm SQM, vacancy rates are running at just 1%. Given that 2.6 million Australians currently rent, this should mean you will find good tenants quickly and are unlikely to experience extended periods when your property is vacant, not earning rent.
Rents are rising quickly because of this supply shortage. SQM says they’ve jumped 11.8% in the past 12 months in the capital cities. In the regional centres, the picture appears worse with the average rise reported at 15%.
In our agency’s area, there are excellent properties, houses and apartments, that would attract potential tenants.
Below, we’ve listed some industry dynamics that any investor should consider before making a commitment. We hope you find them useful.
Long-term tenants
Up to 75% of young households will never be able to afford to buy real estate and are destined to be life-long renters, according to recent modelling from the Urban Development Institute of Australia (UDIA).
Tenancies rising
Only 42% of Australians aged 25-34 own property. This is a significantly smaller proportion than in 2006 (50%) and in 1981 (61%). Again, the UDIA came up with these numbers. The trend here is clear.
Catch next wave early
Landlords currently only account for a third of property-related loans, with the majority going to owner-occupiers. This is another sign of the market needing fresh impetus from investors.
No need to be rich
If you think you’re not sufficiently wealthy to hold a property portfolio, think again. Most investors are mums-and-dads trying to build wealth for their retirement through rental flows and capital gain on property.
Seek advice
Always talk to a professional financial adviser or your accountant to discuss whether property investment is a good fit for you and will meet your financial goals.
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.