Rental prospects for Australian property investors
Finding the right investment property doesn't start and stop at the physical attributes of the home itself.
Finding the right investment property doesn't start and stop at the physical attributes of the home itself. Looking ahead to the ongoing prospects for solid rental income is also essential, if you're going to manage your cash flow properly.
National rental rates are up 1.3 per cent in the current calendar year, according to the September quarter RP Data Quarterly Rental Review.
Individuals with Melbourne houses in their property portfolio may have something to celebrate.
Such dwellings experienced a 2.6 per cent increase in weekly rents over the September quarter - the highest of all capital cities.
This brings the median house rent in the Victorian capital to $390. Between the 2013 and 2014 September quarters, Melbourne rents have jumped by 4 per cent. Over the past five years, house rents have increased by 2.2 per cent - ahead of Brisbane but behind Sydney (3.1 per cent).
By contrast, weekly asking rents for units have remained stable, thought they experienced a 2.8 per cent increase in the 12 months to the September quarter.
While Melbourne houses scooped up the award for the biggest quarterly rise in asking rents, Sydney takes out the second-highest spot for the median house rent amount.
The highest weekly median rent during the September quarter was in Darwin ($660), followed by Sydney ($525). An investor adopting a cash-flow positive strategy for their property will certainly want to focus on the potential weekly income they can earn. Of course, it's essential to crunch the numbers - while asking rents are high, so too are the borrowing amounts in many instances. The median house price in Sydney is now $843,994, while units come in at $580,861, according to the Australian Property Monitors House Price Report for the September quarter.
This offers an important message for investors - while a focus on potential rental income is a must, it's also important to observe the rental yield. Yield can be established by dividing annual rental income by the property's value.
It's not just houses in Sydney that are pulling in big bucks - the median weekly unit rent is just $25 behind the average house rent ($500). Given that units are providing investors with favourable incomes, but have a lower median price, they may be a good purchase option for those looking to expand their portfolios.