March 20, 2014 by Craig Pontey
Real estate has always been a very popular personal investment and continues to remain so. However we are currently seeing some negative comments in the press around the fact that investors might in part be responsible for locking first time buyers out of the market. The reasons behind this are complex, and one unusual trend we have also seen is the fact that both the stock market and real estate values have been on the rise at the same time, they are not always in synergy.
Real estate investments, because they are tangible investments have in the past been seen as ‘safe-haven’ investments for people not keen on the equities market, but we now have an even spread of people keen to own rental properties.
Sydney’s east has always been a strong rental market and that trend is here to stay and is in fact on the rise. But is the bad press really fairly directed at property investors, or is this more an emotive headline when we are in a market with such strong price growth. If we stop and look at some of the key statistics about the rental market, it is possible to see how important this sector is in housing people.
In NSW in 2011-12 there were 876,584 households in rental accommodation, and across Australia that figure for the same period was 2,615,011 households. People in the age bracket 35-54 account for almost 26% of those renting and 33% of people do spend 10 years renting, but 77% spend less than 4 years in their rented homes, and this is one area that might be looked at.
Long-term investors do look for security, and so do their tenants but according some published figures 30% of rental households expect that they will have to move in the next 12 months, but 52% say they do not want to. It has recently been suggested that residential leases could move to longer terms of 3-5 years, and that sort of change would help to ease housing stress.
It has also been suggested that people renting in strata title schemes should have a voice on the body corporate, which they currently do not, again this would appear a reasonable way of improving the quality of some rental accommodation. These sorts of changes I think can also help to make residential investments even more attractive for investors.
However it is clear that many people also want to live, either buying or renting and investing in Sydney’s East because of all of the advantages of the area’s services and facilities and connections to the CBD. The figures reinforce this. Six out of the Top 10 most densely populated suburbs in Sydney are in the east and are the further concentrated in the inner east.
Here are the Top 10: Elizabeth Bay and its neighbour Rushcutters Bay,West Point Parramatta (Homebush), Ultimo, Pyrmont, Darlinghurst,Milsons Point, Surry Hills, Bondi and Potts Point. All are very popular rental areas, many have been so for 50 plus years, and with the exception of West Point all are close to the CBD, West Point also is only 16kms from the CBD.
What I think these figures help to pinpoint is the reality that investment properties are an important part of the housing market, they always have been. The current trend is not a blip on the market, but there may be room for investors to consider the advantages of a longer-term partnership with their tenants, both sides I think would benefit.
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