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Higher growth potential in rent-heavy suburbs

By Staff Reporter
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A high proportion of renters in a suburb can improve a property’s potential for capital growth, according to the Real Estate Institute of Victoria.

In suburbs where over 40 per cent of households were renting, the median house price grew by 81 per cent over the past ten years compared to 67 per cent in suburbs where less than 40 per cent were renters, the REIV found.

Having a high number of renters in your neighbourhood may improve growth potential as at becomes appealing for a wider number of investors rather than just owner-occupiers.

As an example, Footscray in inner Melbourne had a 54 per cent share of renting households, and saw a price increase of 93 per cent 2003 to 2013.
Meanwhile, Bewick in the city’s far south-east – which has only 19 per cent of households occupied by renters – saw a slower growth rate of 55 percent in the same period.

However, investors should note that the impact on unit price growth is not as clear as that of houses, and that there are of course some exceptions where house price growth has been substation despite a low share of renters, the REIV said.

“This serves as a reminder that there are a myriad of factors that could impact on your home’s potential for capital growth, but having a high number of renters in your neighbourhood is not likely to have a negative impact on growth,” the REIV said.

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