After years of falling rental yields and high, pandemic-influenced vacancy rates in Sydney and Melbourne, the pendulum has swung, and it is now a landlord’s market in some parts of Australia. This means a majority of property investors are now seeing greater benefit as a result of high demand and tight supply levels within some parts of the rental market. So, after a few years of lower rents, landlords are now seeing increased rental income.
New figures from CoreLogic have found that in the year ending June, capital city and regional rents have risen by 9.1% and 10.8% respectively, a positive sign for property investors who are also able to command a higher price for their property, should they choose to sell.
Demand is currently booming in the rental market across the nation, particularly Southeast Queensland, as factors such as overseas migration, the return of international students and the easing of COVID-19 restrictions add pressure to the market. As such, renters are willing to pay more to secure a suitable property and this increased demand enables property owners to filter applicants and select higher-quality tenants.
The low vacancy rates recorded across the country are partly due to the behaviour of property investors, who have been selling property more frequently than buying, causing the rental pool to shrink. According to SQM Research, the vacancy rate across the country decreased from 1.7% to 1.0% over the past year, which equates to one vacancy for every 100 rental properties. With Sydney and Melbourne still recording vacancy rates of just over 1.50%, it’s the remaining six capital cities that have vacancy rates below 1.0%, signifying the challenging conditions across the nation for tenants.
Many Australians flocked to regional areas and away from major cities as they sought a lifestyle change during lockdown. Changing working conditions have also contributed to the demand, as more people are working from home or seeking a property with fewer housemates to reduce the spread of COVID-19. As such, the rental market has faced pressures from all areas of the country, meaning that landlords everywhere can benefit from these changing conditions.
The current landlord’s market is a positive sign for property investors, who are now benefiting from increased rental income, yield, and a greater pool of applicants from which to choose.
While the market is prone to fluctuations, owners should consult with their property manager about the current market and assess their rental income against overall yield. In some cases, it may well be time to increase the rent but it’s always important to consider the value of holding on to good, long-term tenants. With interest rates and inflation on the rise, many landlords are wanting to review the rent they are asking but, as always, we recommend investors speak to a First National property manager for an appraisal of their situation.
At First National we are dealing with low vacancy rates every day and are very sympathetic to the Australian rental market. We need more support from the government for additional housing as well as more investors growing the pool of available housing.
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