Growth in investors’ rental income has surged this year with the national median weekly rent hitting $627 nationwide.
And it’s not just the big cities feeling the heat – average costs range from $770 a week in Sydney to $547 in Hobart.
With a housing shortage and a strong immigration flow, these rent rises are unlikely to be a temporary spike. A third influencing factor is a trend for smaller households. According to the Australian Bureau of Statistics, fewer people live together. Consequently, there’s a burgeoning need for more properties to accommodate them.
As many investor clients have properties in multiple states, we think it’s worthwhile to show you data from the East Coast.
Between October 2023 and April 2024, rent growth has re-accelerated most strongly in areas just outside major city centres. Here are three examples:
- Campbelltown, Sydney: Annual rent growth surged from 9.1% to 13.4%.
- Jimboomba, Brisbane: Annual rent growth jumped from 3.8% to 6.4%.
- Casey-North, Melbourne: Annual house rent growth climbed from 11.7% to 13.1%.
While there are legitimate concerns for the position of tenants, the current economic scenario offers a rare opportunity for investors. With high demand and limited supply, aspiring renters are prepared to pay a premium to secure available properties.
This isn’t a fleeting trend but a fundamental supply and demand imbalance that will not correct easily or quickly.
If you’re already an investor, now is the time to expand your portfolio. If you’re new to property investment, this is your chance to enter a thriving market. Below, we offer a six-step guide to achieving a high-performing portfolio.
- Location: Research areas with strong rental demand and potential for growth. Consider both central and suburban locations. Desirable rental properties must be close to schools, transport and centres of employment.
- Property Type: Apartments, townhouses, or houses? Choose a property type that aligns with your target tenant demographic.
- Financial Due Diligence: Calculate potential rental income, expenses and your expected return on investment. The standard benchmark is called “yield”, which should be 5%-8%. If you’re unfamiliar with this calculation, talk to your financial advisor.
- Property Condition: Obtain a professional inspection. A well-maintained property will attract quality tenants. Avoid spending unnecessary dollars on persistent problems.
- Legal Considerations: Understand landlord-tenant laws and ensure your lease agreements are watertight.
- Management Options: We recommend you use a property management team, such as our own, to take care of the property. We can set an appropriate rental price, select tenants and look after maintenance and repairs.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.