Rental prices have been booming. They’ll keep booming.
Rental properties have become a gravy train in recent years. As rents soar, it’s putting more and more money in investors pockets.
(Well, assuming how leveraged they are. Mortgage rates are up to. But the boom in rental prices has been phenomenal.
And in some places in Sydney, rents have gone up an extra $50,000 in a single year!
I’d take that.
Residential landlords in some inner-city and middle ring suburbs pocketed up to $56,000 extra rental income in the past 12 months as rents hit record highs across the major capital cities, data from SQM Research shows.
Vaucluse in Sydney’s eastern suburbs posted the largest rental increase for a house at $1075 per week, or an extra $55,900 windfall, for landlords over the year. This equates to 39.3 per cent year-on-year gain, pushing the median weekly rent to $3810.
Property investors in other Sydney suburbs Ultimo, Summer Hill and Collaroy also racked up strong rental gains after rents jumped by more than $400 each week, delivering more than $21,000 additional rental income. Over the past 12 months, rents in Ultimo climbed by 47.5 per cent, Summer Hill jumped 54.8 per cent and Collaroy increased by 36.1 per cent.
Outside Sydney, house rents surged by more than $363 a week across Teneriffe in inner Brisbane, they were up by $327 in Attadale south of Perth and lifted by $323 in Hawthorn East in inner Melbourne.
Those gains amounted to annual rental increases of 36.4 per cent, 46.1 per cent and 44.2 per cent respectively and rewarded landlords in those suburbs more than $16,000 additional rental income over the year.
Now this return hasn’t been completely without risks. Rates have been rising, and if you were over-leveraged, it’s possible that the increase in rents hasn’t offset the increase in mortgage expenses, and you’re worse off.
But I dare say for most investors who are comfortably mortgaged, it’s been a net-gain windfall.
So, the question now is, will the boom continue? As an investor, have you missed your chance to get on the gravy train?
The rental market doesn’t look like cooling down anytime soon. In fact, if anything, the rental market is getting even tighter.
Louis Christopher, SQM Research managing director, reckons rents should keep rising strongly across the country this year as vacancies fall further.
“We’re seeing renewed tightness in the rental market across the board after easing slightly in December last year, driven by students who are starting their new semesters and new graduates entering the workforce,” he said.
“Vacancies were already low to start with due to the ongoing rental shortage, so this renewed increase in demand can only push rents higher at a rapid pace, certainly over the first half of the year.”
Yup. It’s an everywhere boom.
And the vacancy rate data is still ridiculous. It was 1.1% at the national level in January. That’s an absurd number. It’s incredibly tight.
But at the city level it gets even tighter. In Sydney and Melbourne its just 0.5%.
And the vacancy rate is going to go even lower from here? Wild.
So no, you haven’t missed this boom. Rents will keep rising, just as interest rates will start falling.
Sounds like ideal conditions to me.