Issue 22 | Thursday 02 November 2023 | Rising Commercial Property Investments Amid Rental Surge
Hi there, Andrew Bell here, as we step into the penultimate month of the year. Today, I bring you some intriguing information while standing at 383 Southport Nerang Road in Molendinar, where a prime piece of real estate, spanning 3,565 square meters, is currently leased to two tenants: the BP Service Station and the fast-food chain Carls Jr. These leases span a duration of 10 to 15 years with options for extension. With minimal returns from fixed deposits and the stock market showing steady declines, this commercial property investment opportunity truly shines. Interestingly, it’s located right next to the old Gold Coast Bulletin site. Be sure to watch the video for more details.
Now, onto a surprising tidbit – our new Reserve Bank Governor, Michelle Bullock, mentioned in her recent speech that their data indicates renters are in a better financial position than they were two years ago, despite high inflation and rapidly rising rents. This is thanks to robust employment and income growth, which have shielded people from the worst effects of the rising cost of living. While some may disagree, the Reserve Bank’s research tends to be quite accurate.
On the flip side, despite escalating rents, we haven’t witnessed an uptick in new investors entering the market. Landlords are declining in number, with a decrease of more than 15% compared to three years ago. What might encourage more investors to join the market is a forecast based on recent modelling that highlights the impact of a significant undersupply of dwellings. This shortage is expected to lead to a surge in rental rates over the next five years, with an annual rental increase of 7.6%. The modelling reveals that in 2013, there were just four precincts in Australia with an average rent of over $600 per week for two-bedroom apartments. By June of this year, that number had grown to 20 precincts, and the forecast for 2028 is 38 precincts. This will place over 70% of Australia’s two-bedroom apartments with a rent exceeding $600 per week – a mere four years away!
This rise in rents positions existing unit owners well to boost their returns, in addition to capital growth, which is also forecasted to remain strong.
Adding to the pressures on the rental market is the estimated record immigration in September this year, surpassing 500,000 people, with three months still to go. A substantial portion of this influx comprises international students and working holiday-makers, all in need of rental accommodation. Simultaneously, despite this population growth, Australia ranked as the second worst country in the world for not building enough homes for its people, with only New Zealand holding the dubious title of the worst.
Since the mid-1990s, the number of homes per 100 people in Australia has remained constant, while average household sizes have decreased. Conversely, most other countries have significantly increased the number of dwellings per 100 people, which has contributed to greater affordability for both renters and buyers.
Our demographics are changing, with half of all households now consisting of couples or singles without children. This shift, coupled with a declining birth rate, an ageing population, and more people living alone, is driving the need for more homes, further exacerbated by the aforementioned population growth. While the rest of the world has adjusted to these demographic changes by building more homes per person, Australia lags behind. In 2021, Australia had 41 homes per 100 people, compared to France with 55.4 and Germany with 51.8.
For housing policy to address affordability effectively, we must address the issue of housing supply. Most other measures only make marginal improvements or, in some cases, worsen the situation. We need to build enough homes in areas where people want to live, and currently, that is not happening.
For my regular viewers, you’re accustomed to me showcasing exceptional residential properties. However, given the soaring demand for commercial real estate, I felt it was vital to highlight outstanding investment opportunities like this one. This property is scheduled for auction on December 7th, and you can find more information on screen for Jackson Rameau, who is a delightful person to do business with. With the rapidly growing population and a shortage of commercial properties to meet the demand, these commercial properties will continue to experience high tenant demand. Two fantastic tenants! So, reach out to Jackson Rameau.
There’s plenty more to share in the weeks leading up to Christmas. Stay safe, and let’s not forget how fortunate we are to be in Australia, despite the daily challenges that many face.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group