Data from a number of Australia’s property research houses would indicate that the current market offers some pretty good investment opportunities.
New research from RP Data, for instance, shows rentals recorded a lower level of growth over the past two years thanks to increased demand from first home buyers.
RP Data research analyst Cameron Kusher says this trend can largely be attributed to both low interest rates and the first home owner’s grant (FHOG) boost, which dramatically improved affordability.
“As a result of the boosted FHOG, a record number of first time buyers (who were mostly previously renters) were active during 2009 which in turn eased upwards pressure on rental rates,” he says.
However, now that the FHOG boost has been removed, and there are less active buyers in the market, RP Data says rental growth is likely to pick up over the coming few years.
And, with the official cash rate now expected to stay on hold until the end of the year, now may be an ideal time for prospective investors to make their market entry.
For those weighing up their options on where to buy, Mr Kusher says the inner city suburbs in both Sydney and Melbourne will provide investors with a good return on their dollar.
Currently, Melbourne and Sydney dominate the list of the nation’s top 40 strongest performing rental suburbs – with both cities claiming 16 suburbs each in the top list.
Mr Kusher says he expects to see increasing rental pressure within quality inner city unit markets located in superior locations close to transport and retail amenities.
Construction of new unit developments remains at low levels and many new inner city unit developments have either been withdrawn or delayed.
As a result of minimal supply available in the market, there is likely to be increased competition for the available rental properties, he says.
The net result of flat property values and increasing rental rates will be improved rental yields over the coming year – which is good news for investors.
For a complete list of Australia’s best rental suburbs check out the latest issue of Smart Property Investment, in newsagents now.