Investors could be in for rental drought
Figures released earlier this month by CoreLogic RP Data show rents growing at their slowest rate on record, at 1.5 per cent per year, with gross rental yields in hot-spot capitals Melbourne and Sydney falling to 3.3 and 3.6 per cent respectively, according to the New Daily.
While the government doesn’t have much control over the end of the investment phase of the mining boom, which has hit Perth (rents down 4.5 per cent year-on-year) and Darwin (down 5.5 per cent year-on-year), it is likely, though, that its public service cuts are helping to drive Canberra rents down – they fell 0.6 per cent year-on-year, according to the article.
Those low rates have failed to boost genuinely productive investment, but have helped pump up the Melbourne and Sydney property bubbles. And as dwelling prices rise, rental yields, by definition, fall.
There are currently 1.2 million negatively geared investment properties in Australia – a giant cottage industry in which mum-and-dad investors run their businesses at a loss, the article suggests. Vacancy rates are edging up and credit-squeezed investors who try to raise rents quickly – and remember the US Federal Reserve is likely to set debt markets alight this coming September – will be competing with other worried investors who might even be dropping rents.