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44 May 27, 2014 The Byron Shire Echo
Housing rental yields fall Renters may be happy that rents aren’t rising as rapidly as housing prices, but investors should be concerned. One way a market for incomeproducing assets such as bonds, shares or housing can move from being overvalued to being fairly valued is for the income the assets produce to grow faster than their price. The opposite is happening for housing. The RP Data-Rismark Home Value Index report shows capital-city
home values increased by 11.5 per cent over the year to April while rents rose by only 2.4 per cent.
Housing of the future
Prices rose in every state and territory capital, while rents rose at a lower pace in each – aside from Perth and Canberra where rents actually fell. As a result, gross rental yields – the return for investment in housing before expenses and tax are taken into account – fell to an average of 3.9 per cent nationwide, from 4.3 per cent a year before. And they fell in every one of the capital cities as well. A low rental yield is similar to a high
Housing of the future will be judged by very different standards from the housing of today. As a starting point, it will need to respect ecological limits and suit significantly changed demographic patterns and lifestyles. These principles are embedded in the concept of ‘positive development’ – development that has a net positive ecological and social impact. This might seem like an ambitious goal, but progressive parts of the housing industry are already working towards positive development. It will need to be the norm in any scenario for a sustainable future. Frameworks such as the international ‘Living Building Challenge’ set benchmarks and guidance for achieving positive development, and the not-forprofit Living Future Institute Australia has been set up specifically to promote this objective. Housing of the future will be flexible, adaptable and resilient, helping us to respond to both predicted and unexpected change. As resources will be scarcer and most likely more expensive, housing will need to be capable of meeting its own energy and water needs, producing food and recovering precious nutrients and materials from waste streams. It will be space-efficient in response to ecological limits and the increasing number of single-person households, reversing Australian housing stock’s current status as the largest (by floor area) in the world (James 2009). Housing of the future is more likely to be clustered in ‘urban villages’ located close to local amenities and public transport to minimise transport energy demands. It will also cater for different living and working patterns and for the needs of an ageing population. A likely trend will be towards the division of large family homes into smaller ones, as well as new forms of housing that allow some level of cooperative living among different households and engender a sense of community. Reprinted from yourhome.gov.au
price-to-earnings ratio in the share market. Investors buying into
that market are expecting one of two things. They may be expecting a rise in income from the asset – for shares, higher dividends, or for housing, higher rent – which will turn their low-yield asset into a high-yield asset. Weak growth in employment and wage rates means demand from renters is unlikely to pick up in a hurry. Alternatively, investors could be expecting a rise in the market price of the investment, giving them a windfall capital gain.
Thu L rsd AS ay 1 T V 1-1 IEW 1.3 0am
Auction this Saturday
Mullumbimby 19 Mountain View Road
Accouding to RP Data research analyst Cameron Kusher strong investor activity in the market despite slowing rental growth suggests that most investors are chasing capital growth rather than rental return. ‘When you consider that the value growth in our two largest cities (Sydney and Melbourne) has been so strong over the past year, it’s no surprise,’ he said. The current gross rental yield of 3.9 per cent is only one percentage point above the inflation rate. This suggests the market is vulnerable to a turnaround in sentiment – possibly prompted by the eventual move by the RBA to push interest rates up from their current multi-decade lows, anticipation of higher interest rates, a fall in the exchange rate spooking foreign investors, or just a loss of patience as price rises slow. And the more prices outstrip rents, the more vulnerable the market will become.
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ljhooker.com.au All information contained herein is gathered from sources we consider to be reliable. However we cannot guarantee or give any warranty about the information provided and interested parties must solely rely on their own enquiries.
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