Ditto on how much rents have risen; and the expectation that they will continue rising, and at the same pace, well into the future.
But several sub-measures of the rental market suggest that rental growth is already slowing down. Also, more renters are sharing accommodation in order to afford to live in preferred locations. Plus, renters are leaving sub-par, even average digs, and relocating to better properties. Renters are also staying longer in quality & well maintained homes & occupying lesser quality properties for increasingly shorter leases.
There are some 1,600 postcodes across Australia. Last year, 40% of these experienced a decline in their rental vacancy rate, whilst just over half (52%) saw an increase in the number of dwellings available to rent. Eight per cent saw no change in rental supply.
Nine out of ten postcodes across the ACT saw a lift in vacancy rates during 2012, as did seven out of ten in Tasmania & two out five postcodes across NSW also experienced an increase in rental supply. Western Australia & Queensland had the highest proportion of postcodes (55% & 50% respectively) experiencing a decrease in rental supply.
When looking closer to home, median house rents across Brisbane have increased by $70 per week over the last five years (2007 to 2012 calendar years) but the rate of growth has slowed significantly in recent times. Close to half of this rental growth occurred between 2007 & 2008, and whilst median house rents rose $15 between 2010 & 2011, they rose just $5 last year.
The same applies to Brisbane apartment rents, which rose $80 in total, on average, over the same time period. Yet, $40 of this increase was in 2007-08, with median rents also just rising $5 last year.
When it comes to rental demographics, more people are sharing. A consistent theme across Queensland rental agencies is the increase in the number of people per dwelling. Many have told us that there are around 30% more people living in each rental property when compared to a few years ago.
I assume this is taking place elsewhere across the country. Tenants are leading the ‘space for place’ charge, forgoing personal space in order to afford to live near the action. The 2011 Census doesn’t supply us with the number of people renting, but some quick maths suggests that 2.5 people live, on average, in the nation’s 2.3 million rental dwellings. Ten years ago, the average size of the rental occupancy across Australia, was closer to 2.
My experience – regardless of the stage in the property cycle – is that competition is fierce in rental markets. Prospective tenants always compare your property to whatever else is on offer. They just don’t blindly accept the asking rent without doing their homework. And these days, lots of it. Many parents wish they had studied that hard when at school or Uni!
Too much commentary is based around the total level of supply. Poor product doesn’t rent well, regardless of the lack (or otherwise) of supply. There can be, for example, 1,000 new apartments being developed in one postcode, much of which is likely to be pretty average in terms of liveability. As a result of this quantum of pending supply, the mortgage insurers, valuers & investment sellers all blacklist such an area regardless of knowing what stock is actually being supplied. The well-targeted & designed project(s) in the same area – which will most likely rent out well & resell for a premium – now get dragged down by this helicopter pigeonholing. The devil is in the detail. Sadly, detail takes time. Time costs money.
Developers often seek attractive forward rental estimates to help sell their new product – but in light of the above (and the compromised nature of much of the new stock currently on offer) – the anticipated weekly rents seem, to me, to be quite high & highly improbable. Investors should do their maths on a lower rental figure – something like 10% to 15% less – to be on the safe side.
Don’t expect rents to rise automatically every year. There are many things an investor can do to maximise rents, but again, my experience suggests that rents don’t rise every time a lease is up & keeping a good tenant, even for a bit less rent, is far better than getting more money & having tenant problems. Oh the tales I could tell!
An investor’s aim always should be to sign the best tenant for the highest possible rent in the lowest possible vacancy time. Never let your property sit – advertised for rent – vacant for too long. Properties should be rented out in weeks, not months. Waiting too long stuffs up your cash flow & often gets you less rent in the end. If you want to take longer, do not list it for the full time. It will look stale. Target your lease periods around maximum take-up periods. They vary according to local drivers – i.e. universities, hospitals, new construction projects etc. Ask the local rental agencies for their advice.
Finally, and we are starting to sound like a broken record, buy an investment property that can be shared. One-bedroom stock in an inner city location is fine, just make sure the apartment design/proportions can accommodate a couple if needed. Ditto when it comes to two-bedroom product – having separate bedrooms, with their own ensuites, allows two unrelated couples or singles to share.
In fact, the one ensuite per bedroom ratio is proving to be a good one, especially in regional markets, where resource workers often share accommodation once friendships are established. Four middle-aged men in a four-bedroom/four-bathroom house might not smell too crash hot, but I bet my bottom dollar it would show a great rental return.
Article originally published www.matusikmissive.com.au 26/2/2013
Safe as Brisbane houses
If I had to pick the safest major capital city market to purchase an investment property, I would choose to buy a detached house in Brisbane.
My reasoning is straightforward.
First, Brisbane’s relative cost against Sydney and Melbourne is running near the lowest level in almost 50 years.
Article Source: www.macrobusiness.com.au
Are first home buyers really priced out of the property market?
Some people will kill for a bit of free publicity. The first thing to be murdered is the truth, in the quest for cheap limelight.
In real estate, a perennial favourite among those who seek media profile is the affordability crisis. This is a ripper yarn because it tugs at the tear ducts of all Australians whose hearts bleed for desperate young couples who can’t afford to buy a home.
It’s rubbish, of course, but the truth is always optional in these kinds of storylines.
First, here’s the reality. The past year has been the best time ever to be a first-home buyer in Australia. The level of government assistance has never been higher and the cost of finance has never been lower. And investors have been fence-sitting so first-timers haven’t had a lot of competition.
And young home-buyers have responded in record numbers.
Yet, despite all of that, there are organisations who have managed to construct a scenario where no one can afford to buy or that prospective first-timers have to save for 10 or 12 years to cobble together a deposit for a meagre dwelling.
Here are some recent headlines from mainstream media:-
– “Policy failures see houses become unattainable for young Australians”
– “Australian housing affordability worsens amid fears proposed safe lending laws repeal will lead to debt disaster”
– “Tensions in housing market as affordability worsens”
– “First home buyers take 10 years to save for a deposit”
– “From down payment to dealbreaker: Average house deposit now exceeds 100k”
Those last two screamers are the biggest lies.
How do they concoct such scenarios, at a time when FHBs are out there buying in such large numbers?
Very easily, so as long as you’re not bothered by a conscience. You simply create a formula in which every component is a work a fiction.
Here’s the proposition they put forward:-
– How long does it take the average young couple on typical incomes to save a 20% deposit to buy the median-priced house in Sydney?
It’s difficult to imagine a scenario more distant from the reality of most FHBs across the nation.
Here’s why …
– They stipulate a 20% deposit. Nobody saves a 20% deposit. You don’t need to. You can currently get into a first home with a 5% deposit without having to pay mortgage insurance.
– First-home buyers don’t buy median-priced properties, not in Sydney or anywhere else. They buy in the lower price ranges.
– Why houses? Many young Australians prefer apartments and not just because they’re much cheaper. Why do these fictitious scenarios never insert apartments into the equation?
– Why this focus on our most expensive? Why not Brisbane or Perth or Adelaide?
So here’s a realistic equation to give a true appraisal of the prospects for young buyers: how long does it take to save a 5% deposit to buy a house in the lower price quartiles in Brisbane?
Or how long does it take to save the required deposit to buy an apartment in Adelaide or Perth or Hobart?
Or, given the predominate trend in Australian real estate, how long to save a 5% deposit to buy a house in Orange or Wollongong or the Sunshine Coast or Bendigo or Geelong?
Those are scenarios that equate to the reality faced by most prospective first-home buyers.
But you will never see that equation presented in mainstream media, because it doesn’t serve the desired outcome: a screaming negative headline, with the truth optional.
Article Source: www.urban.com.au
First-home buyers are big budget winners
Help for first-home buyers and single parents to own a home and continuation of an income tax break for low and middle income workers are among key measures that will put more cash in the pockets of Australians following the 2021-22 federal budget.
There is an the increase in the First Home Buyer Super Saver Scheme to a maximum of $50,000, up from $30,000, that can be withdrawn from superannuation to put towards a house deposit. The increase comes into effect on July 1, 2022.
There are annual contribution caps to how much can be made in voluntary contributions that have to be saved in super first, under the scheme, before the money can be withdrawn.
Pension loan scheme
There are changes to the Pension Loan Scheme which allows almost anyone who owns a property and has reached pension age to take out a “reverse mortgage” from the government, where the balance of the loan is repaid when the property is sold.
The scheme pays an income up to an amount that is equal to the maximum age pension.
Under changes that come into effect from July 1, 2022, up to 50 per cent of the maximum annual age pension can be accessed as a lump sum each year. The total amount accessible under the scheme has not changed.
“[The change] is important as it could allow older Australians to access the capital in their home to pay for large, one-off items, such as medical services or home repairs, which they may not otherwise be able to afford,” says Colonial First State general manager Kelly Power.
To help free-up homes for younger families, from July 1, 2022, those aged at least 60 will be able to make a one-off contribution of up to $300,000 per person, or $600,000 per couple, to their super when they sell a home that they have owned for at least 10 years. The qualifying age is currently 65.
Jason Murray, chief of member experience at QSuper, says the downsizer contribution allows retirees to move to more suitable housing as their family size drops and to turn the capital tied up in their home into retirement income.
Family Home Guarantee
The newly introduced Family Home Guarantee (FHG) allows single parents with a maximum annual income of $125,000 to purchase a new or existing home with a minimum deposit of 2 per cent. It is available for property purchases of up to $700,000 in Sydney and $600,000 in Melbourne.
The scheme is limited to 10,000 places over four years; though, if the uptake is strong, the government could well add more places. The scheme starts on July 1.
Eliza Owen, head of research Australia at CoreLogic, says single parent households are largely headed by women, making up about 64 per cent of lone parent and lone-adult households.
“As a result, this policy may contribute toward narrowing the gender wealth gap,” she says.
Andrew Wilson, consultant economist at Archistar, estimates a single parent earning $125,000 using the FHG would be able to borrow about $500,000 at current interest rates to purchase a home.
However, that will still leave them with few options to purchase appropriate family friendly homes in Sydney and Melbourne, where prices are booming, Dr Wilson says.
New Home Guarantee
The government has also extended and renamed a scheme where first-home buyers with a maximum income for couples of $200,000 can purchase a home with a deposit of just 5 per cent.
The price ceilings for the New Home Guarantee are $950,000 in Sydney and $850,000 in Melbourne, with 10,000 places becoming available from July 1 to those seeking to build a new home or purchase a newly built home.
Dr Wilson says the measures to assist first-home buyers are a bit “ho-hum”, given recent rocketing property prices. “They are narrowly targeted and are unlikely to significantly stem an ongoing decline in activity from first-home buyers”, Dr Wilson says.
“Increasing activity from investors and rising property prices are likely to see first-home buyer activity fall by 20 per cent next year, and that is assuming full uptake of the schemes announced in the budget”, he says.
Tax relief will be extended for another year from July 1, in the form of retention of the Low and Middle Income Tax Offset. It is worth a maximum of $1080 for individuals and $2160 for couples, with the main benefits going to those earning between $48,000 and $90,000 a year.
The budget confirmed the current $10,560 cap on the childcare subsidy will be removed.
Families with two or more children aged 5 and under will receive an increase of up to 30 percentage points in the subsidy for their second and later children up to a maximum of 95 per cent of fees paid.
Article Source: www.brisbanetimes.com.au
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