Lower and higher income households seeking out private rental market

Lower and higher income households seeking out private rental market
Lower and higher income households seeking out private rental market

The typical Australian landlord is an owner occupier, at midlife, in a household with two incomes.

Some 72% own just the one rental property.

They don't see themselves as landlords, but rather investors.

Estate agents manage around 75% of these rental properties, an unusually prominent role compared to overseas practice.

The shift from finding rentals in agency office windows has long shifted online and now new technological innovations are being slowly embraced by agents, given raised demands from tenants and some landlords too.

These digital platforms are offering efficient ways at dealing with tenants. 

The Property Connect website offers the means for online move-in dates, lease terms, and even seek competitive rental pricing through LiveOffer. 

The Trustbond website seeks to replace the cash rental bond with a surety certificate. 

Other tech enabling advancements address scheduling property inspections, collecting rents and and organising repairs. 

There's the prospect of tenants across Australia getting their own online profile promoting their worthiness to landlords.

These days tenants are renting for longer periods with around a third of private renters staying in the rental market for a decade or longer.

Recent research has the market demographics changing quite significantly.

Traditionally it was transitional housing tenure for young people in the time between leaving the family home and becoming home owners, but now the market has moved to catering for many more private renters at mid-life. There are more private renters with children.

There has been an increase in both lower and higher income households seeking out the private rental market.

Interestingly, about one in eight landlords are themselves a private renter.

A new report from the Australian Housing and Urban Research Institute noted the biggest change in landlord ownership was in the financing with owners of rental properties relying more heavily on debt.

This affirms the ultimate purpose of landlords is their financial returns. 

These are currently being challenged, so it will be interesting to see if the landlords stay as dwelling values fall and gross rental yields sit close to historic lows.

CoreLogic has tracked rents for over a decade and the latest 0.4% annual fall in Sydney rents for the year to August was the largest decline on record.

Gross rental yields remain low in Sydney at 3.21%.

The total returns from residential housing are not looking "so attractive", CoreLogic research analyst Cameron Kusher recently noted.

Across the capital cities, total returns are at 0.8%, with total returns in Sydney actually falling by 2.5% in the weakest result since 2009.

After dwelling values fell in Sydney over the past year, it highlights that capital growth largely dictate total investor returns in Sydney. 

Kusher suggests given the decline in returns and an expectation that returns will continue to shrink, investors could seek out housing in other regions of the country where total returns remain positive.

It sits at 6.6% for the combined regional markets across Australia and 6.7% for total returns in regional NSW.

But Kusher warns these returns are anticipated to be far inferior to those recorded over recent times in Sydney.

This article first appeared in The Daily Telegraph. 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Tags: 
Property Management Rental market

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