RENTAL MARKETS Throughout 2010 rentals performed quite well with moderate increases in returns. Rental vacancy rates were low in Sydney, Melbourne and Adelaide, with slightly more choice in Brisbane and Perth, but these are expected to tighten further in 2011. Ongoing tight vacancy rates will continue to drive moderate to solid rental growth across most capital cities in 2011. Strong rental returns are expected, particularly given the strengthening economic outlook, underpinning employment and income growth. Demand should still increase, especially as rising house prices and higher interest rates make it more difficult for renters to become buyers. The following issues mean that rents will remain under further pressure as conditions improve: • • • • •
Solid population growth Good income growth Jobs growth Lack of housing stocks and rising demand Worsening housing affordability barriers for first home buyers
During the last 12 months, median rents rose in nearly 75 per cent of Australia’s capital suburbs, many increasing by up to 25 per cent, but some as high as 33 per cent or more. According to First National members: • •
59 per cent of respondents saw vacancy rates trending downwards in 2011 by up to 5 per cent in some areas; 24 per cent saw them flattening out; and 17 per cent saw them trending upwards. 67 per cent expected weekly rentals to trend upwards; 22 per cent expected them to remain flat; and 11 per cent expected them to trend downwards.
The chronic undersupply of housing for tenants will maintain upward pressure on rentals, with the potential to push the majority of weekly rental up by between 1 per cent and 5 per cent, with the potential for increases of up to 10 per cent. Investors are also expected to play a greater role in the rental market, especially in relation to pushing rents up higher, as they seek to compensate for any loss in capital appreciation as prices growth slows, and take advantage of more competitive market conditions.
First National Real Estate 2011 Property Market Outlook
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