Rental Shortage Shows No Sign Of Ending Soon
Rental demand remains high right around the nation but one of the toughest areas is the Gold Coast.
We publish our monthly Property Management Department KPIs for a rolling 12 month period, you can check the numbers here https://www.palmbeachfn.com.au/property-management/monthly-kpis
Despite our monthly enquiry being down about 40% we are still processing 4 to 5 applications for every available property. This shows absolutely no sign of easing soon. Vacancy rates still stay below 0.5%
A lot of investors are getting out of rentals and not as many are getting in, 70% of investors have only one investment property.
Looked at it from an investor's point of view this there is a yardstick called the 5% rule. That is about the level of annual rent you should be able to get for a property you purchased. So, a $1.000.000 property is looking for $1000 a week in rent and getting it.
Out of that $50,000 a year the owner has to pay rates, water, insurance, maintenance and management fees. The net result is an income figure somewhere around about $35,000 a year or 3.5% of the purchase price. Based on current interest rates that property will need to be negatively geared or the purchaser will need a substantial deposit.
Since most of these expenses are not very elastic the return for an $800,000 purchase can be relatively worse on a percentage basis.
In that list of deductions I left out land tax which is higher for houses than units because it is based on the Unimproved Capital Value so 800m2 carrying 8 units will only attract 1/8 of the UCV of the block if it has a house on it.
The now “put aside” increased imposition on owners and tenants - since they would have finished up paying it - that the Queensland government intended adding to the costs and risks of investment properties was just another reason for rental market tightening.
Not every first home buyer can afford to spend $800,000-$1 million for a first home either and a lot of people just don't want to buy, they are happy to rent.
Now we are about to see a surge in immigration because there is a jobs shortage. The best estimates are that with all the constraints on tradesmen, materials etc. we will only see housing for half the proposed number of immigrants in the same period.
This state government should realise that putting their feet on the accelerator and the brake at the same time doesn't work. They need to make it unambiguously more attractive for private investment in the rental market to relieve the extreme pressures we see in the hardship on families and individuals this entails.
by David Hamilton
Managing Director | 0419 763 924
Rental Shortage Shows No Sign Of Ending Soon
palmbeachfn.com.au October 2022
First National Property Solutions
Ph: 07 5559 9600
