For property investors, 2023 could continue tobring happy returns.
Residential rents have been increasingthroughout the past 12 months and there is no indication vacancy rates areabout to ease.
Indeed, one forecast predicts there could be adouble digit increase in the payments made by tenants to landlords.
Ray White Group chief economist NeridaConisbee believes there will be more force on the rental market.
“Population growth is accelerating, puttingpressure on housing demand,” she said.
“Meanwhile high construction costs are pullingback on the supply of housing.
“Right now, this is most apparent in rentalmarkets but is a balancing item to interest rate rises in some locations.”
Meanwhile, CoreLogic economist Kaytlin Ezzysaid house values continued to be more sensitive to rising interest ratescompared to units following the release of their national unit value indexNovember 2022 update.
“As the larger monthly increases in housevalues recorded over the final quarter of last year fall out of the annualcalculation, we'll likely see the annual growth trends intersect before theperformance gap between house and unit values inverts in favour of units,“ shesaid.
CoreLogic head of residential research Eliza Owensaid annual growth in rent values had re-accelerated.
“Annual growth in Australian rent values was10.2 per cent in the 12 months to November 2022, a record high,” she said.
“This has partially been driven by growth inunit rents across Sydney, Melbourne and Brisbane, where rents have increasedaround 14-15 per cent annually.
“Through October, Australian gross rent yieldsrose to 3.71 per cent, up from a recent low of 3.21 per cent in January thisyear.
“Since the end of 2021, gross rent yields inSydney have lifted 66 basis points, and 46 basis points in Melbourne.”
Research from the National Housing Finance andInvestment Corporation shows vacancy rates at exceptionally low levels in mostmarkets as Sydney and Melbourne recover following border closures and thereturn of migrants.
According to the NHFIC, advertised rents areincreasing by at least 10 per cent in Sydney.
“During the pandemic and for much of 2022, inSydney and Melbourne, the lowest vacancy rates (and strongest rental increases)were typically observed in outer areas, with inner-city areas recording highervacancy rates (and lower rental pressures),” the NHFIC said.
Sydney’s vacancy rate is 2 per cent and PropTrackdata shows 2022 was a year of stiff competition between renters in Sydneysuburbs where the rental crisis hit hardest.
They faced rental increases of 30-40 per centin some suburbs. Weekly rents soared by hundreds of dollars in the 12 months toOctober 2022, with renters north and east of the harbour and on the city’sfringe forking out the most.
People looking to purchase a home now choosingto rent rather than buy, as well as the return of tree changers and migrants,meant there were more people looking for a place to live at the same time thenumber of available rentals dropped.
InvestorKit head of research Arjun Paliwalsaid investor activity hadn’t increased despite the strong rental growthbecause of uncertainty around how interest rate hikes would affect borrowingpower.
He said he expected rents to rise 8-11 percent in 2023.
