The latest Australian Property Monitors Rental Report will come as no surprise to Sydney locals trapped in the rental roundabout and continuing to fork out exorbitant costs as tenants.
For property investors, being a harbor city landlord is becoming increasingly lucrative, with median weekly house rents rising by 1 per cent in the December quarter alone.
APM’s senior economist Dr Andrew Wilson reports on domain.com.au, that apartment rents surged by a hefty 2.2 per cent for the same period, after both rental markets experienced a flat patch mid-way through last year.
In spite of the ups and downs across 2011, Sydney tenants still found themselves paying 4.2 per cent more for houses and 4.5 per cent more for apartments by the end of last year, with medians sitting at $500 per week and $460 per week respectively.
“Nationally, the story was similar with house rents rising by 1.1 per cent and apartment rents up 1.4 per cent, with most capitals recording rises in rents in the December quarter,” says Dr Wilson.
He says the cities of Sydney, Canberra and Perth are experiencing an accommodation shortage that is seeing intense competition among tenants when anything becomes vacant in the incredibly tight markets.
While Melbourne renters have it relatively easy, living in what is arguably the most tenant-friendly Australian capital right now.
Living up to its reputation as “the world’s most livable city”, median rents in Melbourne remained stable in the December quarter, with house rents actually dropping by 1.4 per cent last year.
Interestingly, rents for apartments are rising faster than those for houses right across the board.
And I would expect this to continue as more tenants find themselves in a similar position to buyers and that is; struggling to find affordable accommodation in the big cities that most people want to live in or near.
The fact is, our growing population is competing for affordable accommodation in Australia’s inner city circle suburbs that boast enduring appeal.
“Higher demand for apartments also reflects the increasing popularity of smaller dwellings closer to established urban infrastructure, particularly near public transport,” says Dr Wilson.
Not enough construction going on in Sydney
Not helping the matter in Sydney is the ongoing construction squeeze that has seen new dwelling starts drop off significantly for the past several years, thereby adding to the already chronic accommodation shortage.
Unfortunately for tenants, things don’t look to get much easier in the future, with rental competition set to remain fierce and as a result, rents forecast to continue on an upward trajectory.
Of course for investors, this means the potential to end up with a Sydney investment property held in their portfolios with strong cashflows at a time when the world is gripped by economic uncertainty.
It is timely to remind landlords that regular rent reviews in a constantly moving market are essential.
Ensure your tenant is paying fair market value for your property and that you are receiving maximum returns at this time and you will have the ability to grow your portfolio faster, and with peace of mind knowing you are not too highly geared.
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