By Sarah Barton, Terri Scheer Distribution Channel Manager As spring approaches, Australia’s real estate industry…
By Sarah Barton, Terri Scheer Distribution Channel Manager
Australia’s rental market has bucked yet another trend by welcoming in the new year with red-hot demand and low vacancies.
The traditional festive season slowdown during December was instead replaced with heightened activity and some of the lowest vacancy rates seen in recent years, providing a solid platform as we head into 2023.
Monetary policy, migration levels and investment trends are expected to heavily influence the rental market in the coming 12 months.
Property investors and first-home buyers are looking closely at the lending environment, weighing up loan serviceability and anticipated rental returns, with the end of fixed low-interest rate terms for many borrowers looming and further Reserve Bank of Australia cash rate rises expected in 2023.
Terri Scheer spoke with James Kirrane, Head of Property Management at Warwick Williams Real Estate, for his insights into where the rental market is headed.
In Sydney’s inner west, Warwick Williams’ property management team experienced an unusually busy December characterised by strong tenant activity before Christmas.
Mr Kirrane said the number of vacates was equally matched by renters looking for a new property.
“Australians are appearing to move around more than we have seen for a few years,” he said.
“Investors and renters are both highly active with supply and demand evening out and stock levels nearing a return to pre-pandemic levels.
“At the same time, increasing supply of owner-occupied and rental stock is likely to impact purchase and rent values.”
Mr Kirrane said abnormal market patterns have emerged during the past six months with local vacancy rates remaining particularly low at around one per cent.
“House sales are starting to come back from the well-documented high values, meanwhile the rental market has continued to push ahead for investors,” he said.
“Asking rents for all property types in metro Sydney are trending upwards with the value that some rental properties are achieving well above what the areas have previously.”
Mr Kirrane also said the market is now nearing its previous peak in 2017 and will be challenged by rising immigration and construction delays.
“Demand and rental rates are soaring as more people choose to call Australia home at the same time that new properties are taking longer to come online due to material shortages and building delays,” he said.
“Seasoned investors and first-time buyers are taking the opportunity to snap up quality properties in stable areas and, on the whole, we are starting to see a net increase in the number of properties available for rent after diminishing numbers of the past few years.
“With sales prices dropping slightly in line with rising interest rates, investors are still able to achieve good rental returns and we anticipate it will remain this way for at least the first half of 2023.”
Landlord insurance helps to protect against risk
Mr Kirrane said an increase in the number of landlord insurance claims submitted on behalf of Warwick Williams’ landlords last year was a result of tenants breaking their leases.
“Several market conditions likely contributed to this rise, including renters purchasing their own home, others choosing to move back into the family home or changing living situations due to cost-of-living pressures,” he said.
Landlords who hold comprehensive landlord insurance have a safety net to minimise the financial impact if their tenant stops paying the rent or damages their property.
Landlords should choose a policy that provides cover against loss of rental income and property damage.
An insurance policy that covers these specific risks can assist landlords to safeguard their investments and ensure they continue to receive a steady flow of rental income.
Property managers should check their authority to distribute or refer before dealing in insurance.
A distributor is able to deal in insurance on behalf of their property owner. This enables the distributor to speak with the insurer, place cover, amend cover and cancel a policy. Property management businesses can become distributors with Terri Scheer.
Property managers who are not distributors can still inform property owners of the existence of landlord insurance in the form of a brochure. The property owner must complete and sign the application form and send it directly to us by email. Alternatively, they can apply online through the Terri Scheer website.
For further information, call 1800 804 016.
Thank you to James Kirrane from Warwick Williams Real Estate for his assistance in writing this column.
Insurance issued by AAI Limited ABN 48 005 297 807 AFSL 230859 trading as Terri Scheer. Read the Product Disclosure Statement before buying this insurance and consider whether it is right for you. Contact Terri Scheer on 1800 804 016 or visit our website at www.terrischeer.com.au for a copy. The Target Market Determination is also available.
The information is intended to be of a general nature only. Subject to any rights you may have under any law, we do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon it – please make your own enquiries. This article has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it.