Rent Growth Is Highest On Record
International migration numbers are starting to surge, leading to further pressure on rental markets.
September recorded the strongest quarterly rate of national rental price growth on record, with median weekly advertised rents up by 4.3%, according to PropTrack senior economist Eleanor Creagh.
Since the start of the COVID pandemic house rents have increased by 19% while unit rents are up by 8.4%.
However, in the past quarter unit rents have started to lift, with new figures showing Melbourne unit rents are up by 5% and Sydney unit rents are up by 4%.
“That’s much more than the rental price growth rate for houses, as overseas migration and foreign student arrivals rebound,” Creagh says.
In the past 12 months rents for one-bedroom units have increased by 11.1% nationally.
Creagh says conditions for would-be tenants will continue to remain tough because of the constrained supply of available properties alongside the increased demand from international student arrivals.
“The number of highly engaged potential renters per listing on realestate.com.au in Melbourne’s city region has more than doubled in the past 12 months, with parts of Sydney also seeing large growth,” she says.
Creagh says current investor activity is unlikely to be at a level sufficient enough to significantly increase the supply of rental stock.
“With net migration continuing to rebound, without a meaningful increase in rental supply on horizon, it doesn’t look like price pressures will ease in the capital cities anytime soon.”
More Buyers Using Virtual Inspections
The number of potential property buyers viewing listings via virtual inspections has hit as high as 43% in some markets.
Property inspection platform Little Hinges analysed 300,000 virtual inspections and released the findings in its Sight Unseen Report, which shows interstate buyers are turning more to online viewings.
It found 43% of inspections on the Gold Coast were done virtually by potential buyers from outside of Queensland, with 9% from potential overseas buyers. Little Hinges chief executive Josh Callaghan says about a third of buyers looking at Queensland properties did so virtually.
The report found an average of 33% of buyers virtually inspecting properties in Brisbane and on the Sunshine Coast are from interstate, with the majority of them based in Sydney or Melbourne.
“The percentage of interstate inspections has remained consistent since January, showing that the trend of buyers shopping outside their home state is here to stay,” Callaghan says.
He says real estate agents who are able to tap into the “sight unseen” market will be able to leverage the influx of Sydney and Melbourne buyers to achieve much higher prices.
In Sydney and Melbourne, virtual inspections by interstate buyers accounted for 13.9% and 15.4% of inspections.
Bank Loyalty Tax Rises With Rates
Rising interest rates means it is more important than ever for borrowers to shop around for a better mortgage deal, as existing lenders won’t bother to offer better deals to existing customers.
Banks have been quick to pass on interest rate rises since May this year and the majority are offering better deals only to new customers or those who are threatening to switch lenders.
In 2020 the Australian Competition and Consumer Commission found bank loyalty didn’t pay and that existing home loan customers typically pay about 0.25 percentage points higher than new borrowers.
New analysis by mortgage broker Finspo, puts the gap between the rates paid by existing customers and new customers now at 0.48 percentage points.
Former ACCC chairman Rod Sims, who is now a researcher at the Australian National University, says: “The mortgage market is about as non-transparent as any market gets. You just do not know what other people are paying for interest on their mortgages.”
In 2020 the Australian Competition and Consumer Commission urged lenders to give its home loan customers of more than three years an annual prompt to see if they could get a better deal but that is yet to occur.
Rent Crisis: Law Changes Deter Investors
The impact of mum and dad investors on the property market is growing – with over 90% of rental properties provided by private investors – but many are willing to sell up if significant changes are made to residential tenancy laws.
A number of state governments have made or are considering changes to tenancy laws, such as allowing modifications to properties without owner permission and removing the owner’s right to end a tenancy unless on prescribed grounds.
A survey of 7,000 investors by Synergies Economic Consulting says 61% of investors are likely to sell their investment property if such significant changes are adopted.
This could result in many mum and dad investors (small scale, non-professional investors) exiting the market, making the rental crisis worse.
Since the beginning of 2022, mum and dad investors have been particularly active in Queensland, South Australia, and New South Wales. But in recent years their market share has been significantly below historic levels, resulting in falling rental vacancies.
The Synergies report says proposed rental reforms in Western Australia could lead to $105 million in increased rents and an estimated $143 million in higher property management costs each year.
REIWA president Damian Collins says retaining mum and dad investors is integral to a healthy rental pool.
Rentvesting: The Smart Strategy to Live Where You Want and Invest for Financial Growth
Rent vesting: A Smart Strategy for Property Investment? So, you want to own a house, but the idea of forking out a $7,000 monthly mortgage [...]
Inflation and Interest Rate Rises
Inflation at 2.7%: What It Means for the Future of Interest Rates and Property Investment Well, well, well—what do we have here? Inflation at 2.7%, within the magic zone! [...]
How to Leverage Home Equity to Buy Investment Properties
Owning a home in Australia comes with more than just a sense of security. For many homeowners, it opens up opportunities to grow wealth through property investment. One common [...]
Get in touch with our property investment advisors today!
Life changes – your property strategy should too. We review your portfolio yearly and support you every step.
We respect your privacy. View our Privacy Policy.
Get in touch with our property investment advisors today!
Life changes – your property strategy should too. We review your portfolio yearly and support you every step.
We respect your privacy. View our Privacy Policy.
