Brisbane’s rental market is experiencing an extraordinary level of demand from tenants. Supply of rental properties is incredibly low, and these two factors have combined to create one of the tightest rental markets in Brisbane in 10 years. Atlas discussed these new trends and the impact for buyers and sellers with LJ Hooker’s Queensland Head of Property Management Stepfanie Regan. She provides insights into the best next step for investors, tenants and potential buyers.
What rental market trends do you expect to see in Brisbane over 2021?
How is investor participation trending?
How are rental returns performing in Brisbane?
What advice would you give to people thinking of investing right now?
What rental market trends do you expect to see in Brisbane over 2021?
The Brisbane rental market is experiencing a tightening of supply, as the vacancy rate sits at 1.8% and this is likely to continue throughout the course of 2021. The main contributing factor to this lack of rental supply is other states’ COVID-19 outbreaks and restrictions as well as border closures. We experienced huge migration in 2020, with interstate migration at 90% above the decade average and although we are yet to receive the data for Q1 in 2021, we are likely to see similar trends. As long as this continues, we are likely to see an influx of new demand for rental properties. In recent memory, there has been no evidence of a property market so tight. We are experiencing huge demand for rental property, with up to 87 tenant applications on a single property and this is likely to continue to increase through the year.
How is investor participation trending?
Investor participation is trending slightly lower than usual, as there is strong incentive for people to become owner-occupiers at the moment. With incredibly low interest rates, the high likelihood of rapid capital gains and government concessions readily available now, it is more likely people will want to be owner-occupiers over investors. In fact, Brisbane prices are expected to surge 20% by 2023, indicating that Brisbane will be the country’s best performing market over the next few years.
In fact, the government is currently encouraging first home buyers specifically to purchase a home. The state and federal governments have huge incentives for first home buyers right now including the first home buyer deposit scheme, which can be added on to other concessions such as HomeBuilder.
With so many additional grants, many people are choosing to move from tenanted properties and purchase their own homes which they will occupy. With such low interest rates, it is a particularly attractive time for people to buy their own homes.
Many investors are also selling their homes who were previously investors due to excellent capital gains. People are then purchasing these investment properties and living in them as owner-occupiers, contributing to the tight rental market.
How are rental returns performing in Brisbane?
Rental returns and yields have both dramatically increased in Brisbane. Rents are increasing anywhere from 5% through to 15% in some cases, which definitely results in an increase in returns. Brisbane’s gross rental yield for houses is 4%, and for units is 5.2%, which is much higher than other capital cities such as Sydney and Melbourne.
However, this is causing a lot of stress to tenants as affordability is decreasing rapidly. Many investors rely on rent as their only source of income, so are of course, very keen to increase rent. Experienced property managers are trying to encourage an increase of rent in accordance with the market value and are advising landlords not to raise prices too high, especially if the tenants have been good.
Rental returns are definitely increasing, but I would warn landlords against hiking up prices if they have current tenants who are respectful of their property.
What advice would you give to people thinking of investing right now?
Do not hesitate to invest, as it’s a fantastic market with opportunities for great returns and capital gains over time. Put your best offers in as soon as you can. Returns are going to continue to increase at least throughout 2021, so before the borders open and international buyers begin to snap up property, definitely look to a strong investment opportunity.
What advice would you give to current landlords?
If you have good, respectful long-term tenants, negotiate a reasonable rent increase with them so that your rent price is meeting market value. This way, you can increase your returns in good conscience and keep your current tenants.
Speak to your property manager when it is time for your lease to be renewed and see if there is room to warrant an increase on your property. They can advise you on the best next step.
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