Are you considering purchasing an investment property? Whether you’re looking to generate rental income or build long-term wealth, investing in real estate can be a smart financial move; and the current market conditions are presenting a unique set of opportunities for people who are thinking of investing. With high rental demand, the growing population through migration and the current property market, there are plenty of opportunities for those who are well-positioned to take advantage of them.
“There are still very competitive conditions for tenants and with the government encouraging migration, and overseas students coming who’ll rent, it’s likely to be a good prospect for them (investors).” – Domain Chief of Research and Economics, Dr. Nicola Powell
The current economic environment
As we head into the next six months, we anticipate a shift in the market that could present opportunities for those looking to buy or invest. Specifically, the infamous ‘rate cliff’ with approximately $500 billion worth of fixed loans expiring in the next 12 months. Those who fixed their loans when rates were historically low are about to feel the pinch of the nine consecutive rate rises that have happened since last May, which may lead to an increase in properties available for sale. While this could create some short-term turbulence, it also offers the potential for strategic investments and favourable deals for those who are well-positioned to take advantage of them.
Property market
The number of houses being sold is slowly decreasing as people are not buying as much as they used to. A report by CoreLogic showed that in the 12 months leading up to January, there were 500,550 houses sold across the country, which is 19.1% less than the previous year. Although there are fewer sales, it is still higher than the average number of sales over the past ten years by 4.6%.
The property market has witnessed an increase in the median days on the market, rising from 20 to 37 days within the last three months. This situation presents a great opportunity for potential buyers as it could imply a greater likelihood of seller flexibility in negotiating an agreeable deal for the sale of the property. By starting the search early and taking advantage of favourable market conditions, buyers can secure a property at a more reasonable price before it potentially becomes more competitive in the future.
Rental market
House and unit rents in combined capitals have reached a new record and have seen their largest annual increase. The main contributing factor of this growth is the increase in unit rental prices in major cities like Sydney, Melbourne, and Brisbane, which have increased by around 14-16% annually.
There has been continuous rental price growth, with house rents rising for the seventh consecutive quarter and unit rents for the sixth. Although the pace of growth has eased, unit rents are growing at a faster pace than houses due to affordability concerns. There is no quick fix to ease the competitive rental market, and various factors need to be addressed, such as rising investor activity, build-to-rent sector development, rental assistance for low-income households, social housing, and help for tenants to transition to home ownership.
The tables below show the increase in unit and house rental prices over the last year. We see a great opportunity for property investors who are looking to make informed decisions about where to invest based on this increase in rental returns.
House rental price increases
| Capital City | Dec-22 | Sep-22 | Dec-21 | QoQ | YoY |
|---|---|---|---|---|---|
| Sydney | $650 | $650 | $580 | 0.0% | +12.1% |
| Melbourne | $480 | $470 | $445 | +2.1% | +7.9% |
| Brisbane | $550 | $550 | $480 | 0.0% | +14.6% |
| Adelaide | $500 | $490 | $450 | +2.0% | +11.1% |
| Perth | $530 | $500 | $460 | +6.0% | +15.2% |
| Hobart | $550 | $540 | $500 | +1.9% | +10.0% |
| Canberra | $690 | $680 | $670 | +1.5% | +3.0% |
| Darwin | $620 | $613 | $590 | +1.2% | +5.1% |
| Combined Capitals | $550 | $530 | $480 | +3.8% | +14.6% |
| Combined Regionals | $500 | $490 | $450 | +2.0% | +11.1% |
Source: Domain. Median: Capital cities are calculated by using a stratified median price. All other geographies use a middle sale price. QoQ: The quarterly change in the median house or unit price. YoY: The annual change in the median house or unit price.
Unit rental price increases
| Capital City | Dec-22 | Sep-22 | Dec-21 | QoQ | YoY |
|---|---|---|---|---|---|
| Sydney | $575 | $550 | $485 | +4.5% | +18.6% |
| Melbourne | $450 | $425 | $375 | +5.9% | +20.0% |
| Brisbane | $480 | $460 | $420 | +4.3% | +14.3% |
| Adelaide | $400 | $400 | $350 | 0.0% | +14.3% |
| Perth | $430 | $420 | $390 | +2.4% | +10.3% |
| Hobart | $465 | $450 | $425 | +3.3% | +9.4% |
| Canberra | $560 | $550 | $530 | +1.8% | +5.7% |
| Darwin | $520 | $500 | $480 | +4.0% | +8.3% |
| Combined Capitals | $500 | $485 | $425 | +3.1% | +17.6% |
| Combined Regionals | $410 | $410 | $380 | 0.0% | +7.9% |
Source: Domain. Median: Capital cities are calculated by using a stratified median price. All other geographies use a middle sale price. QoQ: The quarterly change in the median house or unit price.YoY: The annual change in the median house or unit price.
Contact us!
If you’re looking to invest, we are here to help. Our team can assess your financial situation and develop a clear investment strategy so you can increase your chances of success on the property market. We can work on putting a long-term strategy in place to help you achieve your financial goals. Don’t wait, take the first step towards building your wealth and secure your financial future.
Source: CoreLogic, Domain
Disclaimer
Any information provided herein is of a general nature only. No consideration has been taken into your objectives, needs or financial situation. Before acting on this information you should consider if it is appropriate for your situation.