Rental price surge expected as borders reopen
With international borders reopening on 21 February, rental vacancy rates are set to plummet, according to an expert.
BuyersBuyers co-founder Pete Wargent has revealed that “a huge backlog of arrivals waiting to enter Australia after two years of border closures” combined with “investors seeking both capital growth and rental returns” could lead to a sharp drop in rental vacancies.
They aren’t the only factors that could contribute to a possible rental shortage from the supply side, according to Mr Wargent, who also noted: “We no longer have high volumes of investors from mainland China to drive the construction of new high-rise units, which has dampened the supply of new apartments.”
Where rental vacancies have been observed, Mr Wargent said “we can expect the snap-back in rental demand to be very strong in Sydney and Melbourne”.
In some areas, that snapback has already occurred. Citing SQM research, Mr Wargent flagged a very sharp drop to a 16-year low in the rental vacancy rate, driven by sudden sharp declines in Sydney and Melbourne in January – and brought about by the return of people to workplaces across the capital cities.
Banking on an influx of people returning to work onsite and the arrival of migrants and international students, Mr Wargent has predicted rental markets will continue “experiencing very tight conditions”, meaning we can expect to see “rental price growth rising into the 10 to 20 per cent range forthwith”.
Weighing in on the current market conditions, BuyersBuyers chief executive Doron Peleg highlighted opportunities for investors by looking at specific regions to benefit from capital growth and rising rentals, which could result in good total returns.
Mr Peleg said this approach is key, especially now that “unit to house price ratio is at record lows, reflecting that affordability for houses is becoming a challenge for many investors”.
Taking off from Mr Peleg’s insight, Mr Wargent identified locations with “solid opportunities” as “the coastal markets on the eastern seaboard, including on the Sunshine Coast, as well as in Sydney’s northern beaches and eastern suburbs” and also “suburbs in Melbourne’s inner south”.
For specific market types, Mr Wargent pointed to “boutique unit developments with reasonable strata levies, and if the budget permits, look for family-friendly units with owner-occupier appeal, in those popular suburbs where the supply is somewhat capped”.
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