A wise man once said, ‘those who hold the gold, hold the power.’
And that man wasn’t wrong – because that gold as we know it is SHELTER, aka property.
With the national vacancy rate declining to its lowest point on record at 0.8%, many Australians are paying more for rent than they would a mortgage due to rental listings plummeting a whopping 48.2% nationally.
In this instance, Governments have the choice of either increasing rents even more OR providing a dramatic increase in property supply to offset the demand and rationalise costs.
However, even with the 2022-23 budget proposal of one million new homes by 2030, this still does not address the immediate need for housing, putting another prospective property boom on the cards.
In this instance, one would be wise to invest in the ‘gold’ sooner rather than later to reap these incredible rewards.
Let’s break it down.
THE RENTAL LANDSCAPE
During October, the national vacancy rate reached its lowest point on record at 0.8%.
Declining across all major capital cities with the exception of Brisbane and Darwin, each capital remains in a landlords’ market, generating high levels of competition among tenants and further fueling the existing rental crisis.
To give some context to the growth landlords have enjoyed over the last 12 months, asking rents for houses are sitting at $530 nationally, incurring an increase of $60 YOY while units are averaging $490 an increase of $70 YOY.
For investors, this amounts to an (approx.) additional $3,120 per year for a house and $3,640 for a unit – without even touching the property!
With demand at an all time high and supply at an all time low, landlords are in a very favourable position to increase their weekly rents and improve their cash flows. The biggest increase in weekly rents YOY have been seen in: Melbourne (+14.9%), Sydney (+14.6%), Adelaide (+14.3%), Brisbane (+12.2%) and Perth (+10.5%).
IMMIGRATION RETURN
As of September 2022, 1,072,000 immigrants returned to Australia compared to a mere 18,850 in September 2021 (ABS).
In the lead-up to 2023 and 2024, immigration is likely to see record highs with the annual permanent migration cap recently being lifted to 195,000 to ease workforce shortages.
Further driving demand for housing from international migrants returning for education and work purposes,, the rental crisis is expected to worsen particularly across the states of Sydney (who has just seen its fourth successive monthly fall in vacancy rates) and Melbourne (who’s rental listings saw the biggest annual fall across the capitals, -64%). This increasingly competitive environment is continuing to driving up rent prices with house rents at a new record high and unit rents closely following suit!
HOTSPOT LOCATIONS
Despite the media hype around the age old headline ‘Will The Australian Property Market Crash?’, which has proved resilient time and time again, the decline in property values is nowhere near as significant as portrayed.
Since peaking in April, capital city house values have reduced by -7.2% while unit values are down -4.2%. (Corelogic), averaging a 22.7% growth in houses since pre-pandemic levels and 9% growth in units – an outstanding result for such a short time frame.
While many have been deterred from property, and particularly property investment as a result of these god fearing headlines, there are still plenty of markets within markets that are demonstrating strong growth potential across all Australian states.
Think about it like dropping pebbles in a pond, there’s different markets all across Australia and different markets within different states that can take off at different times.
In our latest eBook ‘12 Property Hotspots Set to Skyrocket Your Property Portfolio in 2023’, we identify the key locations around the nation which are earmarked for rewarding growth and detail the essential factors to consider when purchasing an investment grade property.
DETERMINE YOUR FUTURE
Smart property investors don’t target a certain type of property in a certain area/state, and don’t wait for the market to ‘come down.’
It’s about targeting investment grade properties situated in growth areas and investing when you can next afford to.
Property investment is a long term strategy, and that is the most crucial factor to remember here.
Waiting to invest in property could cost you thousands in opportunity cost, and time cannot be reconciled.
As I always say, the best time to invest is the next time you can afford to. As soon as you’re in a position to buy a property, you have your deposit and the bank can lend you the money, you should be looking at purchasing – you should not be waiting.
So if you’re thinking about kickstarting your property investment journey and generating a passive income to give you more financial freedom, simply fill out the form below to request a no-obligation strategy session with one of our esteemed Senior Property Wealth Planners valued at $495 for FREE.