Rising rents a bonanza for investors
House price growth may be expected to be pretty average in 2011, but rising rents are proving a windfall for property investors.
There’s not much exciting to be said with regards to property price growth potential for the year ahead. Most analysts are expecting the market to be flat, at best.
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But the good news is, rental demand is strong, and supply is short, which means rents are on the rise, helping to deliver much welcomed cash flow to the pockets of investors the nation over.
New figures released by the New South Wales government today revealed that rents for three bedroom homes in Sydney spiked 10 per cent in 2010 to $440 per week. That’s about four times the annual rate of inflation.
Investors within the inner ring of the city can earn a median of as much as $750 a week for a three bedroom property, the figures revealed – reflecting an annual increase of seven per cent.
Indeed, the rental market in Sydney is tight, and it’s not just the figures which confirm it.
A friend of mine recently attended a rental inspection in the Eastern suburbs; she said there were potential renters lining up right around the block.
Needless to say, she missed out on the property, with one eager renter offering a better price, as well as the 12 months’ rent in advance. Phew. What a nice cash injection for the landlord.
The truth is, Australia’s housing supply continues to run well below the number required to meet demand. This, though damaging to housing affordability, is working in favour of landlords. And it’s not just in Sydney.
The 2011Urban Development Institute of Australia’s (UDIA) State of the Land Report recently found that land supply is putting pressure on housing markets the nation over.
Sydney led the pack, in terms of the worst supply/demand gap, followed by Brisbane and then Perth.
And according to RP Data’s Cameron Kusher, investors can expect rents to continue their upward trend as 2011 progresses.
“For the coming year we expect rental markets to tighten further and rental growth during 2011 will likely eclipse that of 2010.”