As a little follow up to my previous entry regarding the Australian Real Estate Investment Opportunities in 2007 i looked around for another sign of change in real estate market dynamics - the change in vacancy rates.
As vacancy rates measure the availability of rental properties on the market, if vacancy rates are low (i.e. increased demand) then the rents are expected to raise. While this will trouble most of the renting population, it is good news for the real estate investor who should receive an increased yield form his/her rental property portfolio. As stated in this article in Sydney Morning Herald:

“According to the Real Estate Institute of Australia, vacancy rates across the country are showing no signs of slowing. Its September quarter survey showed vacancy rates ranged from 1.1 per cent in Canberra through to 2.1 per cent in Perth.”

So how come we have a shortage of rental properties in Australia? For the unaware, it has been long time coming. The property market values (with the exception of Western Australia) have been pretty much flat since 2005. Therefore there were not many more new investments made and not many new apartments were built. Couple that with perhaps the main cause of the slowdown – the increases of interest rates people need to pay on borrowed funds – and the result was on the cards.

In next few years, if the current economy environment prevails, we can expect yearly increases in our rents as vacancy rates are deemed to stay low. In line with the information from this source in Sydney Morning Herald:

“A range of reports also warn that rents across Australia, particularly in Sydney, will soar until 2010. Analyst BIS Shrapnel has predicted that rents will increase 10 per cent a year in 2007 and 2008, with average rents in Sydney to increase by as much as 40 per cent from 2006 to 2010.”

For above reasons, the property investor outlooks are quite promising as these are the signs of typical buyer’s market. The cashed up investors who were smart or lucky enough to sell in 2005 are now most likely starting to look around for some bargains in areas they are familiar with. Hey, they may even be cheaply repurchasing back the properties they once owned and loved but sold to a crazy high bidder at an auction when the boom was on!

This entry was posted on Wednesday, January 10th, 2007 at 1:53 am and is filed under My View, Real Estate. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.