Can you find the exit nearest you ?

We have discussed the declining prospects for Oz housing over the last few months as it becomes apparent that the last decade of debt driven government supported growth looks like it is finally coming to an end. Without further government intervention the market seems destined to take the tour towards the bottom. This is a big problem for the investment market because many “investors” are holding onto loss making properties simply to cash in on the capital gain. In Queensland and Western Australia and Tasmania that plan is already in trouble.

The other part to the “investment” market is rent. This, unsurprisingly, also looks like it is struggling. We note today that rental returns on “investments” aren’t doing as well as expected, with rents actually falling in the September Quarter across the country.

Rents remained stable in most Australian capital cities in the September quarter of this year, according to Australian Property Monitors’ (APM) rental report.
Nationally rents fell by 0.3 per cent for houses and 0.5 per cent for units.

The September quarter was the second consecutive quarter where rents held steady, says APM’s head of research Yvonne Chan, with the March quarter this year being the last period of positive growth.

Annual rental growth for houses stood at 2.8 per cent, which is well below the long-term average growth rate of 6.8 per cent she says.

Rents for units grew by a stronger 4.8 per cent over the year but still performed well below their long-term average of 7.3 per cent.

Despite a flat rental market, Chan says the outlook for rents is still one of growth.

Demand and supply pressures remain as population growth continues,” she says. “Tight vacancy rates, together with a strong economic outlook, will lead more of the population into the rental market and inevitably higher rents.

Well Mr Chan, we wouldn’t be holding our breath. Rising population ? Tight vacancy rates ? We can agree that the economy seems strong in comparison to other OECD nations, however that is already the case; rents haven’t moved for 6 month in this environment so we are unsure how this is an argument for the positive.

With falling prices and now it seems stagnant (at best) rents we wonder if “investors” know where the nearest exit is? Let’s hope they can find it behind all those other people trying to get out.

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  1. There is apparently a huge decrease in the amount of international students applying for universities next year. Indian application are apparently down 80% if I read correctly. Universities have already said that they will become smaller operations. So what of the rental market?

  2. Yes, the flow on effects, easily forgotten. High vacancy rates in one area will also have an effect in other places. I know many international students who rent a bit further out from the city due to the high inner city costs. The business effects will be significant as well.

    And, as you have well described in the past, higher vacancy rates or any of the other issues that are present won't necessarily create a slide but stagnant or slightly negative growth will.

    However, this student problem could be quite serious and the dollar was lower when you wrote about it…