August 26, 2022
What The Current Rental Market Means For Property Investors
The Australian property market continues to transform as the RBA has increased the cash rate for the fourth consecutive month to curb rising inflation. Investors and renters are being warned to brace for changes in the Australian property market. For investors, interest rates will continue to increase and lending will become stricter and for renters there are projected further increases to rent in 2022 as shortages in rental supply, and the end of stagnated population growth, drive up competition for available properties.
Our capital cities have seen a median rental price increase of approximately 7% over the last 12 months and the availability of rental properties has also decreased. However, this news is not all bad as it may result in great investing opportunities for those who are ready to invest or for renters who want to join the 70% of Australians by owning their own property and make the most of decreasing property prices.
The property experts at HYG will provide you with the necessary information so you can have a better understanding of the Australian property market and property development investment.
Australian Property Market Data for Q1 Financial Year 2022/23
The Australian dream of owning a property appears to still be attainable regardless of inflation with two thirds of households owning their home outright or with a mortgage according to figures out of the Australian Bureau of Statistics (ABS). In fact, households that own a home with a mortgage have increased from 26.2% in 1996 to 35% in 2021 and the number of homes owned with a mortgage has increased by 96.8% according to the ABS.
Rental homes on the other hand have halved over the past 12 months, causing a rental crisis across the nation. Vacancy rates around the country now sit uniformly at crisis levels, with Sydney & Melbourne being one of the hardest hit cities. Rental stock in Sydney fell another 3.3% to just under 8,000. Melbourne’s monthly decline cut its total rental listings to 8,244 – a 53.8% plummet over the past 12 months which is the sharpest decline of all the capital cities. Across combined capitals, the number of vacant homes dropped 5.4% to just 19,715.
In the past 12 months to march, house rents in the combined capitals jumped 8.6% to a record $508 per week. Sydney alone had its largest annual increase in 13 years, of 9.1% to a record $600. And if vacancy rates remain low, the prices will keep climbing. The current tightening of all of the cities’ rental markets will reduce choice, increase competition for rentals, and exacerbate less favourable rental conditions for tenants overall.
Another contributor for the rental crisis is border closures in March 2020 as a response to COVID. The Australian population growth significantly stagnated which in turn effectively the rental supply has trended down over the past two years, driving prices up, all in the absence of international migration to Australia. With borders open to vaccinated visa holders including tourists, business travellers and other visitors from 21 February 2022, the demand for available rentals will increase further, putting even more upward pressure on the rental market.
In general, these will be locations where tenants are aspirational and have a good income and are likely to have increasing income over time so they can pay you more rent.
Here’s What Rising Rent Prices Mean for the Housing Market
It is predicted that rent will continue to increase throughout 2022 and with the rental market and housing markets very much connected this will have various implications.
Long term renters will begin to look to purchase a property to live in or invest in to avoid continuing to pay for increased rental costs and make the most of the decrease in the property market. Some renters will begin to evaluate the commitment and costs associated with homeownership (maintenance, repairs, and property taxes, to name a few) versus continuing to pay for rent that will increase throughout the year. Others will see it as an opportunity for investment in property development due to higher rent and lower costs.
There will continue to be fewer low cost rentals to choose from, which means tenants will no longer be able to afford places they would like to live in and be forced to be less picky. As rents increase, a lack of reasonably priced rentals might result in some families living with other families in shared bedrooms. With rental availability limited tenants may begin to start subletting one or more rooms to help cover the increases in rent. Due to the rent increase, high-end rentals become more available, however the percentage of tenants who can afford them begins to shrink.
Investment Properties Available For Purchase By HYG
And while property investors can look forward to rising rental returns, an investors’ future income will be dependent upon their tenants’ ability to keep paying higher rent over the years.
This is why it is important to invest in the right property, in the right suburb and at the right time. By investing wisely, you will be able to find tenants that will be able to afford higher rents over time rather due to changes in the property market.
Some of the recent projects by HYG include:
Think luxury living and this apartment-meets-retail space in the city’s north-west will come to mind. A minimalist’s dream, the 9-storey Epping-based building is home to a retail space and 31 apartments.
Residents get to enjoy the serene atmosphere of neighbourhood living and close proximity to Epping’s bustling city centre, including Epping train station, library, local shops and both private and public schools, Arden Anglican and Epping Public.
Pymble is renowned for its spacious surroundings and architectural finesse. We’ve situated a breathtaking design in the heart of the Upper North Shore – 20 spacious apartments in two 5-storey buildings. We now only have 2 units remaining as we are nearing completion in September.
The Symphony apartments blend together Japanese aesthetic and Scandinavian design, plenty of natural light, blonde timber and a captivating stone garden feature. They are situated a short walk to Pymble train station, Pymble Ladies’ College, Pymble Public School and local shops and amenities.
At HYG, we are devoted to improving the lives of our clients, no matter what it takes and we are proud to create unique property investment opportunities in Sydney. All of our property developments in Sydney embody the idea of quality, with an emphasis on high functionality making them a great investment in our current Australian property market.
Contact our Sydney property development team to find out more about the latest and fruitful opportunities.