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Rents Rising – but not everywhere

Rentals have increased significantly this year in Sydney, Brisbane and Perth according to RP Data.

This is good news for property investors, who’ve been missing out on capital growth this year.

In Sydney average rents increased 5.9% for houses to $550 a week and 5.4% for units to $513 a week.

The means investors are achieving gross rental yields of 5.2% on Sydney apartments and 4.4% on houses in Sydney.

In Brisbane and Perth house rents increased 4.8% and 10.1% respectively and unit rents went up 8.4% and 6.8% respectively over the last year.

In contrast Melbourne average house rents only increased 1.9% while unit rents remained the same.

“The common denominator across Sydney, Brisbane and Perth’s strong rental conditions is that new housing supply has been insufficient relative to population growth,” according to RPData research director Tim Lawless, writing in The Sydney Morning Herald.

“The number of dwellings that commenced construction across NSW during the June quarter was just 6,696. [In] Victoria, where housing demand is virtually the same as NSW,… there were 14,684 dwelling starts – more than double NSW.”

This decade NSW had 25% fewer dwelling commencements than the previous decade.

“With the Sydney housing market clearly under-supplied we have seen rental vacancy rates reportedly fall below 1.% and the upwards pressure on rents is likely to persist,” he says.

“This is compounded by the fact first-home buyers represent a fairly small proportion of the market.”

My thoughts:

Rents are likely to keep rising in Sydney in 2012 due to a shortage of properties.

On the other hand an oversupply of properties in some areas of Melbourne will means rents will languish.

Looking a little further ahead, with thousands of off the plan properties coming to the market over the next few years I can see CBD rentals in Melbourne dropping as desperate investors vie for a smaller pool of inner CBD tenants.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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