Falling Rents Means Investors Need To Focus On Research

Falling Rents Means Investors Need To Focus On Research

25 May 2016 Professionals 0 Comment

The latest rental figures produced by CoreLogic for the year ending April 2016, shows that the median weekly rents for capital city houses have fallen nationally by 0.5%.

Weekly rents are under a downward pressure due to a surge in new home construction combined with a slowing population growth rate and weak wages growth.

The extent of this downward pressure on weekly rents is highlighted by CoreLogic figures covering suburbs which recorded the biggest falls in weekly rents for houses over the past year throughout Australia.

These ranged from a 13.8% drop in weekly rents for houses in Forrest (ACT) to a 40% slump in weekly rents for houses in Tamarama (NSW).

A significant trend highlighted by the CoreLogic figures is the sharp drop in weekly rents for more affluent suburbs such as Peppermint Grove in Perth which is one of the more expensive places to live in the city.

The CoreLogic figures show that the median weekly rent in Peppermint Grove fell by 33.3% over the past year to $1,200. This sharp fall in premium rents can largely be explained by the downturn in the resources sector with the result that there are fewer people employed in the mining/oil and gas sectors seeking executive accommodation.

This downward pressure on weekly rents is expected to continue in a number of capital cities due a large number of new apartments that are under construction and many of these are likely to end up in the rental market over the coming year.

Rental growth is particularly important for mature investors who are looking to purchase high yielding rental properties that will help fund their retirement.

These figures highlight the fact that research is now very important in identifying suburbs where rents are not only under a downward pressure but also areas where there is the potential for growth moving forward.

Issues to consider when looking for suburbs that have the future potential to deliver high rental yields include the demand for rental accommodation in the area and future population growth.

Established suburbs that are undergoing urban renewal that will attract new residents and have limited housing supply currently offer the greatest opportunity for rental growth in capital cities.

Property investors should also take a micro approach to each suburb and identify what kind of properties are most in demand by local renters.

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