Andrew Bell’s Market Update: Have Rental Rates Increased?

MARKET WRAP: Issue 16 August 4th, 2016

There are 2.3 million rental households in Australia, of which 55% are detached houses, 30% are units or apartment and 15% are semi-detached such as townhouses. About 30% of total renters live alone and a further 23% of renters are childless couples or empty nesters. The balance are in household groups. The above certainly supports advice that the strongest demand is for smaller houses or apartments in sizing.

Has There Been An increase In Rental Rates?

The combined capital city rental rate is around $483 per week and it has only shown a small increase over the past 12 months. As interest rates have continued to soften and low inflation has kept other costs contained, we are seeing that landlords are opting for a better tenant rather than higher rentals, and of course, the lower the rental, the bigger the pool of tenants you have to choose from.

Lower interest rates have also helped increasing numbers of landlords to cash flow positive situations. That is, no need for negative gearing. There are 31% or $2.4billion fewer people negative gearing in 2012-2013 than the previous peak. Unfortunately, there are no more up to date figures than those years.

Other Factors Than Can Affect Rental Increases

In addition to lower costs for landlords, slower population growth and higher construction numbers have played a part in moderating rental increases through most of Australia. The reality is, if the majority of landlords are not looking for rental increases then it will limit rental growth for all landlords because it means that the majority of rentals will be at a lower figure preventing more ambitious landlords from getting higher amounts.

Vacancy rates lower than 3% indicate strong rental demand whilst rates above 3% reflect an oversupply. Nationally, vacancy rates are currently in the early 2% bracket for houses and just over 3% for apartments. Amazingly, rental vacancy rates on the Gold Coast have dropped dramatically over the past four years from 5.5% in 2011 down to 2.3% in 2013 and down to 1.7% in 2015 and are continuing to fall. In fact, in our own office, which is one of the largest property management offices on the Gold Coast, we are averaging 1.1% vacancy and that is the lowest vacancy I have ever seen in my 40 plus year career.

Sadly, more Australians have given up on buying property and as such it means there are more and more looking to rent. So there is this constant need for investors to enter the market. Thank heavens there has been no change to the negative gearing regulations because if it had been tampered with Australia would have seen increasing major rental shortages developing and particularly in the established market places.

How Often Do People Sell Their Homes?

To another market trend now, seeing Australian’s selling their homes less often.  They are holding onto their homes for long. The average length of time a capital city home is owned has climbed by nearly four years since 2004. In 2014, which again is the most recent figures available, we see that homes in capital cities were owned on average for 10.5 years and apartments for 8.7 years. Holding homes longer means it is likely that there is significantly greater equity in these homes and equity is a powerful asset that can be used to buy either the next home, fund a renovation or indeed buy an investment property. It is certainly worth consideration for those who have had their homes that length of time.

Finally, for this edition, we now have over 800 people booked into this year’s Ray White Surfers Paradise Muscular Dystrophy Ball. The new venue seems to have captured everybody’s imagination and it is primed for a great night. We will look forward to hosting so many of our clients and friends on that evening but could I please put out a thought. We are keen to secure some additional auction or even raffle items to be offered on the night to raise funds for the fight against Muscular Dystrophy. If you have a piece of memorabilia or can package together a holiday or an experience or anything similar it would be a great auction item. When we go to work for charities I have to swallow some pride and beg & borrow and do whatever is necessary to raise the maximum dollars we can for the charity. There are so many young kids affected by this Muscular Dystrophy and they urgently need some help. If you are able to help us please let us know by contacting Selena Carson and her details are on screen (Selena Carson s.carson@rwsp.net or 0410 650 185).

Well, that is it for this week and I look forward to being with you in a fortnight’s time.

Kind regards,
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group