YodZiaN

Property Investment within Australia has increased in popularity in the past year; strong economic indicators point to recovery from the impacts of the Global Financial Crisis. Prospective investors are moving focus from their share portfolios, to invest in bricks and mortar, as rental returns seem guaranteed to increase after a slow growth year in 2009.

Impact of Global Financial Crisis on Rentals

At the peak of the Global Financial Crisis, there was minimal rise in the price to rent property in Australia as people either delayed purchasing a house, or could not afford to keep their mortgages due to job losses and failing world markets. Increases in unemployment lead to increased demand for rentals, putting pressure on prices. The Aussie battlers who were stuck in the rental market could not escape and achieve the dream of home ownership.

Winding Down of First Home Buyers Grant Lowers Vacancy Rates

The First Home Owner’s Grant (FHOG) was introduced by the previous government to combat the impact of the introduction of the Goods and Services (GST) tax to Australia in 2000. First home buyers were given a grant of between $7,000 and $21,000 to assist with purchasing a residential property. This grant was boosted during the Global Financial Crisis to uphold the economy and support homebuyers, trades people and the real estate market within Australia. Since September last year, the government has been winding down the grant. The impact on potential buyers has been delaying house purchases or putting purchasing off altogether. As a result, they have placed more demand on the rental market and the rental vacancy rate has fallen to record lows.

Investors Bring Attention Back to Property

House purchase prices are still below 2007 highs, but set to rise dramatically this year as the FHOG is reduced, immigration increases and house prices rise out of reach to those on lower incomes. Capital gains as well as rental yields are rising and investors are looking for a bargain before property prices rise too far, or interest rates become prohibitive to qualify for investment property loans.

What This Means for Renters and Landlords

Nation-wide rent increases are expected. While there are still some reasonably priced properties to rent out there, Landlords can afford to demand premium prices because people are desperate to find accommodation. It is not unusual for 50 or more people to attend ‘open for inspection’ days at properties advertised for rent. As we learned in economics in school, according to the laws of demand and supply, an increase in demand and lower supply leads to raised prices.

What This Means for Homeowners

These issues don’t just impact on those who can afford to invest in property, or the people in the rental market. Homeowners are experiencing unprecedented capital gains and demand outstrips supply for homes. Auction clearance rates shout recovery and home listings are rarely on the market for long periods. Vendors will get excellent prices, but it is still expensive to buy back into the market, unless they downsize. This can be a very satisfactory outcome to baby boomer parents, whose children have left home.

There are great investment property opportunities available as belief in the market has boosted prices as well as returns. The only negative impact is on the renters who have to pay more for the privilege of living in someone else’s house.