A study by a real estate agency has revealed rental increases are not keeping up with property price increases, and shouldn’t be prioritised.
The study, which looked at 25 years’ worth of rents and property prices in the Perth area, saw a rise of 115 per cent, while median weekly prices rose by 180 per cent.
“This 180 per cent increase in the Perth median price over the past 25 years shows that over the long term, investing in the Perth real estate market is a sound investment,” said Shane Kempton, chief operations officer at Professionals Real Estate Group.
“The figures also indicate that the rental market in Perth is set for an upward correction in the future as the mining and post-mining boom of recent years has distorted the Perth rental and sales markets.
“Over the past three years, the rental market in Perth has experienced a significant oversupply of homes at a time of declining population rates, which has had a very negative impact on the rental market.”
In order to find tenants, Mr Kempton said landlords have to cut rents, attributing to their fall, while falls in property prices are less severe due to the support of low interest rates.
Therefore, as Mr Kempton points out, Perth investors should be focusing on long-term capital growth of properties, rather than rental yields.
“Too many first-time investors make the mistake of focusing on rental returns in the short term rather than long term capital growth rates,” Mr Kempton said.
“To achieve the best long-term capital growth rates, astute property investors need to look to at least [a two-decade] hold strategy.”