Rents on the rise again, opening door for investors

Rents in Australian capital cities are rising again, according to a report released today.

The rental sector has lagged behind its property sales counterpart in early 2021, but according to new research from Domain, it is now on the rebound across the country and numbers are already surpassing previous peaks.

“What we are seeing is a lift in rents across the country, but it’s certainly not uniform, even across the capital cities,” said Domain’s Senior Research Analyst, Dr Nicola Powell. “We’re seeing that inner city locations are weaker compared to outer and even regional areas, where rent growth has been very strong.”

For brokers and property investment clients, it represents a return to form for the rental sector. In recent months, First Home Buyers had overtaken investors within the market, but with vacancy rates falling and rents rising, the potential for return on investment is back.

“Gross rental yields, which are what investors might look towards, are varied across capitals,” said Powell. “When you look at the forecast for property price growth, allied to increasing rents in some cities that have been seeing multi-year downturns – Perth springs to mind – I think it’s understandable why some of these markets will lure investment activity.”

One of the key drivers behind the growth in rents has been the movement from inner cities to suburbs and regional areas that came about due to the pandemic.

“During the pandemic, that was a trend,” said Powell. “If you look at the rental market, there is less friction in moving and its easier for a tenant to relocate than it is for a homeowner who has to sell up and purchase a new property. I think the change has been quite rapid in the rental market.”

“If we look towards the future, the question is whether these trends are here to stay. Particularly when we’re seeing rental growth in inner city areas, especially in inner Sydney, which was most disrupted by rents. What we’ve now seen over the quarter is rents in these areas either holding steady or increasing.”

“We might be now seeing a turn of events where some people migrate back into the city as we go back into the office or revert to a more hybrid working environment. We have seen a trend of people moving to ‘lifestyle’ locations, and strong rental growth in places like the Northern Beaches in Sydney or the Mornington Peninsula in Melbourne, as well as regional areas, but my view is that, long term, for capital growth or rental growth, it will be those regional locations that are connected to a central working hub.”

From AustralianBroker

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