There is no question that it is a landlord’s market at the moment with record low vacancies and higher yields. This situation is expected to continue throughout 2022 despite the expectation that interest rates will rise before the end of the year.
According to SQM Research, the national vacancy rate fell .2% down to 1% in March, the lowest national vacancy rate in 16 years with the total number of empty properties halved in the past year. New loans to investors are up 68% from last year according to the latest ABS figures and units are coming back into favour with investors after a decline during COVID.
There are several factors contributing to the state of the market
- Interest rate increases expected
The general consensus is that interest rates will rise and rise quickly before the end of the year, but the fact remains that they are at an all-time low. Increasing rental returns allow investors to absorb the higher mortgage payments more easily. - Borders opening
Demand for rentals will increase with borders reopening and international visitors and overseas students arriving, driving growth in tourism, the labour market and the economy. Inner-city locations are already seeing an increase in demand after the covid decline. - Share market volatility
The majority of Australian property speculators are mum and dad investors who shy away from the volatility of the share market and look to property investment as the safest play. In the first quarter for 2022, all major stock benchmarks saw their biggest losses in two years. This volatility is expected to continue and despite the threat of interest rate rises, property remains a favoured investment option. - Rentvesting is trending
Savvy first home buyers are investing in property they can afford and renting in places they prefer to live (or need to live for work) and can’t afford to buy in. Popular with younger couples, it enables first home buyers to get started in the property market and it is often easier to purchase a second property down the track using the equity in the first investment. - Pandemic savings
For many, savings have grown during the pandemic. Households have saved on average 17.2% of income since the pandemic started, compared with an average of 6.1% in the two years previous. Some accessed superannuation, some saved because they couldn’t travel but for whatever reason, investors are feeling more confident about the future and are looking at upgrading their property or purchasing an investment property for wealth growth. - Investment growth leading to more investment
Those who already own an investment property and have enjoyed such low vacancy rates and higher rental returns are now looking to expand their portfolio and take advantage of their equity.
Whether you are looking to invest in property in regional areas or in the city, the low vacancy rates are across the board and are unlikely to change any time soon. Industry watchers are predicting a return to unit purchases in the metro areas after a long downturn during covid. With the economy expected to bounce back, property investment is looking promising.
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