Interesting news for anyone interested in property investment: according to an Australian Bureau of Statistics (ABS) report released earlier this year, rents across Australia have now increased by more than mortgage repayments. As an indication of the steep increases, the median household rent rose by almost 50% between 2006 and 2011, with mortgage repayments only rising an average of 39% during the same period.[i]
The research was gathered from the Census of Population and Housing, which was established to provide data on information such as home rental rate, type of landlord and the costs of renting.
The ABS’s research also found that areas in Western Australia and Queensland have experienced rapid increases in rental prices, thanks to increased levels of demand for housing from workers in the mining and construction industries, as well higher wage increases in these sectors.
Unsurprisingly the inner suburbs of the major capital cities continued to have the highest median rents in the country, including:
• Inner areas of Sydney such as Ku-ring-gai (at $575 a week) and Woollahra (at $550 a week)
• Inner areas of Perth including Cottesloe (at $450 a week) and the city itself (at $440 a week)
• Inner areas in Melbourne, including the city (at $400 a week) and Bayside (at $390 a week)
This average increase in rents is great news for landlords, and encouraging for anyone thinking about investing in property in the near future, as there is little indication that this upwards trend will soften in the next year or two. However there is a caveat to this: as these figures suggest – especially in regional areas – rental prices are being affected by particular factors such as workforce demand. A downturn in the mining or construction industries may well precipitate a fall in worker demand and a decrease in rental prices over the long term.
Again, looking at the data for landlords there are clear winners when it comes to getting the best possible rental income – inner city locations in major capital cities still outperform the rest of the country. Property experts such as John McGrath from McGrath Estate Agents have this year predicted that demand for inner city rental properties will continue well into next year and beyond, with price growth suggested at between 5% and 10%. Partly the growth is expected to be fuelled by increased demand among people looking to get into property investment in Sydney, Melbourne, Brisbane, Adelaide and Perth.
With this in mind if you are considering entering the property market, think about a property investment in an up and coming or established inner location, close to transport links, shopping centres, sporting facilities and schools – essentially the amenities that tenants will look out for and even pay more to be close to.