The Australian property market is currently experiencing a rental crisis that has only grown following the events of the COVID-19 pandemic. As the population grows and immigration increases, so does the demand for rental properties. Vacancy rates are at an all-time low, and rental costs are rising. But what does this trend of growth indicate for property investors and the future of the rental market? This article will look at the contributing factors to Australia’s rental crisis, projected trends, and why rental properties remain a strong investment class.
What Contributes to the Rental Crisis?
Australia’s rental market has shown marginal signs of stabilisation in the June 2023 quarter. However, according to CoreLogic’s data, vacancy rates still sit at a mere 1.2 per cent vacant. The shortage of properties on the rental market still affects both tenants and prospective renters. Many factors contribute to this, which include:
- Strong population growth
- Low construction approvals
As a result of these factors, the rental market in Australia is very tight. Vacancy rates are at a record low, and rental prices are rising rapidly. This creates an excellent opportunity for investors looking to buy investment properties.
Why You Should Invest in the Rental Market
It is an excellent time to invest in property for several reasons. In light of current property market trends, there is a continuous growth in demand for rental properties, and the housing market has shown signs of stabilisation. The following factors point to property being a very secure investment.
High Rental Demand
The high demand for rental properties in Australia will likely continue in the coming years. This is due to the continued strong population growth. Australia’s population is growing at around 1.6 per cent per year, putting pressure on housing demand as more people are looking for a place to live. The low levels of construction in housing also contribute to this. The number of dwellings being built does not keep up with the demand of the growing population and points to a continuing deficit of available properties.
Rental prices are increasing in Australia, which will likely continue due to the scarcity of properties and high rental demand. This means that investors can expect a good rental yield from their properties, and rental prices will continue to rise in the next few years.
Property Market Stabilisation
Based on Sydney’s property market trends, property prices have recently stabilised despite high interest rates. As an investment, strong and stable capital growth coupled with a reliable rental yield points to residential property continuing to be a desirable asset class.
Of course, some risks are also associated with investing in property. Before purchasing an investment property, you should consider the following risks:
- High interest rates
- The downturn of the rental market
High interest rates can affect investors’ ability to service their loans. It is important to talk to a mortgage broker about your financial circumstances to discuss the feasibility of purchasing an investment property.
The possibility of a downturn in the rental market will occur if there is a decrease in population growth or a surge in rental property supply. However, this is unlikely to happen.
Overall, the risks associated with investing in property in Australia are relatively low. The high rental demand and rising yields make it a desirable market for investors. If you want to invest in property, read about investment loans to learn more.
The Australian rental market is experiencing a rental crisis. It will likely continue in the coming years, as the factors causing it are not going away anytime soon. Despite these challenges, there are still opportunities for investors looking to buy investment properties.