Rental Yield Outlook Positive

2009 saw many first home buyers take advantage of the additional government stimulus schemes on offer to buy their first home and get out of the rental market. This impacted in less demand for this sector of the market.

However this decline was offset against the overall population growth in the major cities centre’s around the country. BIS Shrapnel, in its latest report offerings is forecasting a 5.8% increase per year in rental increases.

The shortage of overall dwellings, namely in the medium to high density set of inner city locations, is a contributing factor to forecast rent increases. The shortage is due to developers struggling to get secure cost effective borrowings to get these projects off the ground following the GFC and the ever increasing cost of construction, which is making most of these projects less attractive from a profit point of view for developers.

BIS shrapnel believe that with continued population growth, including record levels of immigration, it is inevitable for rental markets to continue to tighten considerably in 2010 and remain that way in 2011. Therefore, cities and towns that provide strong employment and educational opportunities will continue to attract their share of population increases.

BIS Shrapnel forecast the annual rental returns in Australia’s largest cities over the next three years to be:

• 7.1% p/a – Sydney
• 5.6% p/a – Melbourne
• 5% p/a—Brisbane
• 3.4% p/a—Adelaide
• 3.2% p/a—Perth

As costs rise to hold our investment properties through higher interest rates, and demand remains strong, it’s smart investment practice to pass on a portion of these increased costs in owning these properties.