Personally I think there is a correlation, but the question is to what degree. Try to rent in a good area against a bad area and you will find the property values in the good area are more, as is the rent.
I admit this says nothing about growth, as it is only a snap shot in time. But, the correlation between good areas or high in demand areas should surely relate both to rent and property values.
As measured over time surely high in demand areas would exhibit strong growth both for property values and thus rentals.
I mean look at it this way;
1. high demand area => low vacancy rate => upward pressure on rentals
2. high demand area => low for sale rate ( i.e. more people wanting to live there than want to sell supply Vs demand ) => upward pressure property values.
The lag may be reflected by rental contracts of 6 to 12 months. Thus one would have to typically have to wait for a full 12 month cycle to see the rental prices begin to reflect the capital growth from the previous year.
I can see the logic of everyone want to buy and thus nobody wants to rent also, but applied at a more macro level. However on a more local or micro level perhaps less so.
In any event, even applying the macro logic to the micro or by suburb level, the reality is that even if everyone wants to buy, many of those that want to buy, want to buy so they can rent out the property on the logic that they believe they will get strong rental returns in a high demand area.
I admit this says nothing about growth, as it is only a snap shot in time. But, the correlation between good areas or high in demand areas should surely relate both to rent and property values.
As measured over time surely high in demand areas would exhibit strong growth both for property values and thus rentals.
I mean look at it this way;
1. high demand area => low vacancy rate => upward pressure on rentals
2. high demand area => low for sale rate ( i.e. more people wanting to live there than want to sell supply Vs demand ) => upward pressure property values.
The lag may be reflected by rental contracts of 6 to 12 months. Thus one would have to typically have to wait for a full 12 month cycle to see the rental prices begin to reflect the capital growth from the previous year.
I can see the logic of everyone want to buy and thus nobody wants to rent also, but applied at a more macro level. However on a more local or micro level perhaps less so.
In any event, even applying the macro logic to the micro or by suburb level, the reality is that even if everyone wants to buy, many of those that want to buy, want to buy so they can rent out the property on the logic that they believe they will get strong rental returns in a high demand area.
