Your Property News October 2022

Much has been written about the increase in weekly rents that have been recorded over the past year. According to CoreLogic, in the year to July, Australian median rent values increased 7.5 per cent, which is the strongest annual appreciation in rents since December 2008.

However, some of this rental growth was clawing back price reductions that took place during the first year of the pandemic. Indeed, prior to the pandemic, rental growth had generally been benign, or even falling, for the best part of a decade – contrary to some media reporting.

There were many reasons for this, including ample supply of investment properties and record low interest rates.

But something happened in 2017 that started to upend that equilibrium, with lending restrictions being instigated that mostly targeted investors. This naturally made many investors wary of purchasing and adding to the rental supply. Then we had floods, then we had bushfires also scaring investors away.

So, unsurprisingly, we saw the volume of active investors in the market start to fall, because many simply couldn’t secure finance to transact, or were being put off by ill-advised tax policy planning.

By July 2019 investors were thin on the ground, so rents started to strengthen somewhat… until the pandemic hit, and they started falling again.

Industry research has found that rents have grown at only half the rate of inflation for more than a decade – even after allowing for the past year’s rent increases and the current inflation spikes.

The research – using the Australian Bureau of Statistics Consumer Price Index from June 2012 to June 2022 – found that rents increased by just 11 per cent nationally over the decade, but inflation rose by 25.6 per cent over the same period – a shortfall of nearly 15 per cent.

On an annual basis, rents increased by about one per cent per year, versus average inflation increasing at more than two per cent each year over the decade.

According to SQM Research, the national residential vacancy rate was just one per cent in June – the lowest in decades, plus investor activity is still below historical averages. And it’s no wonder considering the bad rap that investors continue to get.

That means that there are not only fewer rental properties available for tenants, but investors are still not adding the usual supply of rental stock, which will mean the situation will continue to worsen for some time yet.
Article published in The Property Tribune – Kate Hill, August 2022

On a positive note for property investors – the proposed land tax calculation that the Queensland State Government was introducing, has been scrapped. Investors will now have their land tax calculated on their Queensland property only.

Buying, selling or managing your investment – we are your local property professional. You and your property needs are our focus.

Amanda
Amanda Butler – Principal
0438 767 439

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