Wednesday, July 14, 2010

We may be in the ‘off-season’ but our rental market is fairing well and set to strengthen

Winter seems to be fairing well on lots of counts this year, when it comes to our property market. Just a few weeks ago RPData analysts backed up our long held belief that June is one of the strongest months for sales in Adelaide, not Spring.

Now it’s our rental market’s turn to buck the trends.

This year June’s vacancy rates were almost reflective of our peak season (November to February) due to an increase in demand triggered by the end of financial year and an increase in corporate relocations. Toop&Toop recorded vacancy lows of 0.9% in the North, 1.8% East, 0.8% South and 0.6% in the city and North Adelaide. The West continued to fair a little higher, at 2.8%, with a number of Newport Quays properties currently vacant, yet there is a silver lining here also. Last week our coastal team let two penthouse apartments in this development - the interest is there.

When it comes to growth in rental rates over the month, it’s a different story. In the latest report from RP Data’s national research analyst, Cameron Kusher, rents around the nation, saw little or no change. Adelaide remained steady with a 0% change, yet when it comes to annual growth – we’re out on top at 6.7%, and it looks like we’ve much more room for growth.

We now host the most affordable rental houses in the nation with a median of $320 per week, lower than Hobart at $325. Our unit prices sit second to lowest $280 per week, with Hobart at $275 – it seems we’re literally neck to neck with Tassie.

This closely mirrors where Adelaide sits nationally when it comes to housing prices. Going on May figures (June’s won’t be released until later this month), Adelaide was second in affordability only to Hobart, with a median dwelling price of $387,500.

The price of our housing is constantly in the spotlight, with first home buyers finding it increasingly difficult to get their foot in the door of the property market. Those who took the plunge last year, ready or not, have now felt the pinch of numerous rate rises and may be questioning whether to sell or retain their property, by renting it out.

“… it makes sense that we will see demand for rental properties increasing over the next 12 months. Affordability pressures, due to higher interest rates and higher home values, are forcing many prospective buyers to remain (or return) to the rental market”.

According to Mr Kusher, the outlook for investors going forward is all positive… but renters may feel otherwise.

“Landlords are likely to be reviewing rental rates to make up for an erosion of profits caused by higher interest rates. Low vacancy rates and ongoing high rental demand means that landlords should have a reasonable amount of leverage to raise weekly rents upon a rent expiry. Higher rental rates should in turn lead to an improvement in rental yields and a greater incentive for investors buying into the residential property market.”

So the future is looking bright for the market in the ‘Year of the investor’. This week’s ToopTV, with Baker Young Stockbrockers’ Mark Potter, was a must see for investors keen on shares or property. To view or podcast the show go to, and be sure to keep Wednesday the 28th July free for the second Property Vs Shares Showdown – we’ll see if property can make a comeback.

Mandy Wurth, General Manager.
© Toop Real Estate Group

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