Current rental income growth is well below the rate of inflation, but this may well change in the short term.
As new research from RP Data shows, capital city rents over the past year have only increased by just 2.7%, while Australia’s latest annual inflation rate is 3.3 per cent.
RP Data found Brisbane’s median rent for houses is only$370 a week and has been at this level for at least 3 months.
Brisbane’s median rent for units is now $365 a week and is up 1.4 per cent for the June quarter, up 2.8 per cent for the past year and up 43.1 per cent for the past five years.
Rental has not seen much change since 2008 due to a number of factors such as higher interest rates and removal of the First Home Owner Grant boost which enticed prospective First Home Buyers into the market and eased demand for rentals,.
It is reasonable to expect that we will see better rental growth in the coming year because depressed property sales volumes and inactive first-home buyers should lead to increased competition for rental stock.
In the long term, structural changes in the rental market may also have a positive impact on investors’ future earnings.
New research by RAMS Home Loans suggests many Generation Y Australians are trying to purchase their first homes in preference to entering the rental market.
Its survey of home loan holders aged under 30 found 71 per cent have never rented.
“RAMS are seeing younger people entering home ownership and applying for home loans.
The next wave of young Australians dubbed Generation Z may become a generation of renters who do not aspire to own a home, Resi Mortgage Corporation CEO Lisa Montgomery says.
“This generation will have witnessed their Gen X parents juggle and leverage themselves in order to buy the property they want whereas for Gen Z that idea is increasingly less attractive,” she says.
In Europe many people do not even dream of buying a home of their own. This may become the case in Australia in the future.