Rents to rise in 2010 ?

Discussion in 'Property Market Economics' started by keithj, 26th Oct, 2009.

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  1. keithj

    keithj Member

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    Population growth is continuing at a record pace, so demand is increasing.
    Developers still can't get finance to build new houses, so supply is limited.

    For the last couple of years the only way these macro numbers can add up, is by increasing the number of people per household. The young move back with parents, people share houses or take in a boarder, or live on the streets, motels and caravan parks.

    Now that the economy is showing signs of improvement, is the number of people per household going to fall, and give a corresponding increase in rents ?


    Or....

    Are yields as high as they are going to get in this cycle, and if there's no significant increase in property prices, unlikely to increase at more than inflation ?
     
  2. investor2009

    investor2009 Member

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    It depends.

    Where abouts are you talking about?

    Geelong is alot different to Karratha.
    There are different factors at play in every suburb within Australia.

    My answer which I see to be very fitting is. Yes, and no depending on location.
     
  3. MichaelW

    MichaelW Little Guy, Big Dreams

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    Or....

    Is the number of people per household going to rise, and give a corresponding increase in rents ?

    I'll vote C. ;)

    If we look at the simple demand and supply imbalance as a count of available properties, then a huge spike in immigration at the same time as a drop in building completions can only mean that the number of people per residential house increases. This is regardless of people's "desire" to spread out. If there physically isn't enough properties to spread out into then we're all forced to bunch up.

    Either one of two things can happen:

    1: Prices increase and rents stay flat.

    This means builders will get their finance across the line, and with a slight lag more properties will come on line to meet the spread out demand. Rents won't necessarily rise as there's less competition to rent as there's now more properties available. But we do see increased house prices.

    2. Prices stay flat and rents rise.

    Builders won't get their finance and current restrictive 70% lends so regardless of what the increasing population want to do, they're unable to spread out because they're unwilling or unable to pay more for properties that would see the prices increase and more builders getting their finance across the line. As such, rents will increase. Rents are ridiculously low at present based on current property valuations. As more and more people fit into single addresses, there's more scope for these people to fund higher rent rates.

    My PPOR in Sydney for example is now let to 4 chefs who work in the area. They all live together and between them only pay $750pw in rent for that place. I'll push it up to $800pw or more when the lease comes up in 12 months time because I can. The price may not rise quickly, but all this bunching up means rents certainly can.

    Just my food for thought (no chef pun intended). ;)

    Cheers,
    Michael
     
  4. josko

    josko BluePlanet-Green Shackles

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    I thought rents could not/would not rise at present not so long ago. Now I am re-thinking.:rolleyes:

    It all comes down to two things:

    1. An affordability issue and simply what a tenant will and will not pay. - Which can be crossed out with multiple tenants.

    2. The demand for more housing - We already have a lack of supply and development. Add population increases and off we go.

    I agree with Michael and Investor and think that we would have to consider where the major population increases are.

    It will be a domino effect but the percentage of increase will be relative to the proximity of the property to all the usual requirements of location and access.

    Regards JO
     
  5. vbplease

    vbplease Still on my L plates

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    In Brisbane I'm getting the impression that vacancy % has increased slightly with the FHO's taking up the grant.. also the bidding wars (by desperate renters) that increased rents a year or so ago are now illegal. I also think that rents are reasonably high relative to current earnings, so not much room to move..
     
  6. Player

    Player Live Every Day

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    Onward and upward

    The usual caveat of markets and sub-markets ;) , however in a generic sense, IMO rents will rise again........more CF :D

    Time frame indeterminate, however when interest rates rise and hit circa 7's to 8's by end 2010, we will see rents also rise. There is a shortage of well located accomodation, so supply and demand will see rents move upward again, perhaps not to the degree of the last two to three years, however it will still be cheaper for the tenant to rent in the suburb they prefer to reside than to buy there. ;)

    Demand will see rents onward and upward :)
     
  7. MichaelW

    MichaelW Little Guy, Big Dreams

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    Michael,

    Was that 5 smilies in one post? That's got to be a record... ;) :eek:

    But I agree. Can't see rents going any other way.

    Cheers,
    Michael

    PS Happy Birthday for yesterday!
     
  8. Player

    Player Live Every Day

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    Yeah, the Michael's have it............we can both count :D

    I don't think we're allowed more than five in one post. Just optimising my cyber-entitlements :p

    Thank you for your wishes.
     
    MichaelW likes this.
  9. Aaron Sice

    Aaron Sice Seldom Seen Kid

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    i see with the strangle of credit coming it may be a case where it costs as much to buy as it does to rent - those that can buy - will, those that can't buy - wil get no discount.
     
  10. Oscar

    Oscar Member

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    Michael, my old PPOR was rented for 750 with 4 girls sharing. I now have one executive chef renting it at $705....:(

    Bring on the sharers:eek:

    FWIW with I.R's increasing and restrictions on supply the only way for rents in the areas I have invested in are up :)
     
  11. Francesco

    Francesco Member

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    I tend to agree with MichaelW that the immediate trend will show rent is likely to be up and so will per capita usage of the house.

    The principal reason I am giving is that the trend for rent is affected by the marginal demand and the significant factor for marginal demand is immigration. The likely usage profile of immigration is increased numbers per house because the key migration groups are asians who are used to living with many per house.
    :)