10/02/2011 - 00:00

Rents rise potential lone bright spot: REIWA

10/02/2011 - 00:00

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COMPETITION between tenants is expected to place upwards pressure on rents, that could be the lone bright spot in a struggling residential property market, according to REIWA president Alan Bourke.

Rents rise potential lone bright spot: REIWA

COMPETITION between tenants is expected to place upwards pressure on rents, that could be the lone bright spot in a struggling residential property market, according to REIWA president Alan Bourke.

Speaking at an Australian Property Institute and Financial Services Institute of Australia function, Mr Bourke said falls in median house and unit prices had wiped out any property gains in the past three years, with median prices now back to December 2007 levels.

Turnover has also taken a substantial hit, even as the number of listings reached all-time highs in January.

In January 2010, there were just more than 10,000 residential properties listed for sale, while the current figure is 15,300.

“We have had five quarters of decline in activity and that’s pretty much unprecedented,” Mr Bourke said.

“In the December quarter, our turnover was 25 per cent below 15-year averages. We need something like about 8,000 transactions per quarter and we were sitting there with about 6,000.”

Mr Bourke said similarly poor figures were recorded following the global financial crisis, but a boost to the first homebuyers grant and rapidly falling interest rates had rectified that.

“This time, we aren’t going to get any interest rate subsidies so it will be interesting to see what prices do over the next 12 months,” he said.

But while the options for capital growth on housing were limited, Mr Bourke said the rental market could be a factor in the eventual recovery.

“The good news story is the rental vacancy factor,” he said.

“We have moved from 4.5 per cent vacant to around 3.5 per cent and I imagine that by the March quarter it could be 2.5 per cent and that will be the first sign of rents going up. Traditionally there is a very high uptake in January and talking to agents around the place, they are talking about a 0.5 or even 0.1 per cent vacancy rate on their books.

“If that’s the case, we will start to see rentals rise.

“There is competition for tenants again and we haven’t seen that for about 18 months or so.

“If you are an investor, you will start to see rental growth and that may be the catalyst for improvement in the market. Investors want capital growth or yield or both and the yields are improving and that may entice investors into the market.

“It could also entice renters into the market because they will be saying, ‘If I am paying $500 a week for rent, it may be appropriate for me to go buy one for myself’.”

 

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