Softening rent rises reflect more first homebuyers

Softening rent rises reflect more first homebuyers

Posted on Wednesday, March 06 2013 at 11:34 AM

A slowing growth rate in asking rents across many localities could indicate increased first homebuyer activity, according to one market analyst.

SQM
Research has released its Weekly Rents Index revealing landlords increased
asking rents throughout 2012 at a slower rate than in 2010 and early 2011.

The
index records rental asking prices on a weekly basis and shows many renters may
now be looking to purchase their first home, according to SQM Research.

“Rental yields in Australia have lost pace in
recent months.

“This is most likely attributed to the latest
recovery in the housing market, prompting renters to exit the rental market in
favour of purchasing property – thus causing vacancy rates to loosen in many
localities.”

Results indicate a broad difference in rental
demand around the country given the impact of major industries such as mining, according to Louis Christopher, managing director of SQM Research.

“On one hand there’s Perth and Darwin recording
very solid rental increases right across the localities of both cities, and
then on another, we note what seems to be a slowdown taking place in the Sydney
rental market. And then there’s Melbourne where within that city there are
clear pockets of oversupply of rental property and pockets of undersupply. This
illustrates by far that there are markets within markets,” Christopher says.

The SQM index shows asking rents have softened
for both units and houses in four of the eight capitals compared to 12 months
ago.

Andrew
Wilson, senior economist with Australian Property Monitors, counters his
analysis and reveals there’s upwards pressure on rents in some capitals with
mixed first homebuyer activity across the nation.

“Perth,
Brisbane and Sydney are seeing upward pressure on rents whereas Melbourne rents
have been flat-lining.”

Wilson
says in areas where rents have been strong such as Perth, first homebuyers
activity has already picked up.

In
Wilson’s opinion, the upward pressure on rents is the result of various state
schemes designed to entice first homebuyers into the market, thus bringing forward
demand in the sector.

“We’re
now seeing the hangover,” he says.

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