It’s an interesting time to be a property investor. As rents surge, many are banking on a lucrative sale before interest rates go up. But if there’s one thing we’ve learned from the pandemic, it’s that timing the market to make a profit is far from easy.
Your 10-second news wrap
Good news for property investors: it’s a landlord’s market, according to the latest data from SQM Research.
- The national vacancy rate dropped to 1% in March 2022, from 1.2% the month prior. It’s the lowest national vacancy rate in 16 years.
- The total number of empty properties across the country has halved since March 2021 (from 72,446 down to 36,868).
- Every capital city in Australia is now considered a landlord’s market, with vacancy rates for each capital city below 2%.
- All other capital cities logged vacancy rates below 1%.
- Hobart has the tightest rental market, with only 111 empty homes in the city (0.3% of the market).
What does this mean for you?
- If you have a rental property, you’re likely to be in a favourable position, no matter which market your property is in. Investors with properties in inner-city locations are already reporting a rise in demand, with international and domestic borders reopened, prompting an upsurge in immigration and tourism.
- A landlord’s market will translate to higher rents across the board. Property investors with vacant properties or upcoming lease expiries should take this into account when reviewing or negotiating their rent. It’s also a good time to convert homes into rental properties, given the great demand.
- After a period of sharp declines in unit rents during COVID-19, property investors with units are finally in the box seat. Unit rents grew by 3% in the March 2022 quarter, compared with 2.4% growth in house rents. This isn’t expected to be a temporary trend, with CoreLogic predicting unit rents to continue outpacing that of houses.
- This is also expected to lead to an improvement in investor returns, despite a broader slowdown in the property market. Gross yields are already showing the first signs of recovery, picking up by 2 basis points in March – an increase CoreLogic described as “rare”. A rise in yields should provide some comfort to property investors concerned about returns.
- Increasing rents amid a tight rental market will help property investors better absorb the impact of higher mortgage repayments when interest rates creep up. Banks are forecasting the cash rate to reach as high as 1.25% by the end of the year.
Facts of the week
- Property investors make up 33.3% of total new mortgage demand (excluding refinancing) in Australia, according to the latest data from Australian Bureau of Statistics.
- This has increased from a record low of 22.9% in January 2021 but remains below the 10-year average of 34.9%.
More quick news
- CBA has lifted the mortgage rate by 90 basis points for investors on two-year fixed terms making interest-only repayments.
- House values in the Gold Coast’s Broadbeach area have doubled every 4 years in the past decade. In Sydney, the Manly area saw prices doubled every 3 years & 5 months since 2012.
- A small shop in Sydney’s Circular Quay has set a new price record, selling for $11.5 million - or a whopping $153,000 per square metre.
Prices at a glance
Houses
Units
- Housing prices in Sydney & Melbourne continued to ease for a second month in a row and are falling behind more affordable markets like Canberra, Adelaide and Brisbane. Price growth on a national level is also slowing its pace, albeit more gradually.
- Regional markets appear to be well-insulated from the slowdown seen in the rest of the country, recording 1.7% growth across houses & units in the past month, compared with 0.3% in the combined capitals.
