15th May 2009
As more first homebuyers enter the market, rental growth is set to slow particularly at the high-end in town.
The Brisbane house and unit rental markets have remained consistent over the past 12 months, achieving yields just under 5% for units and just above 4% for houses. Yet Gavin Hulcombe, chairman of Herron Todd White, Queensland Hulcombe questions the sustainability of the rental market heading further into 2009.
"Solid rental returns and low vacancy rates may very well continue on from strong 2008 results, although the risk that this growth could slow is evident, given the amount of first home buyer tenants moving into home ownership," says Hulcombe.
"We're seeing a lot of this happen in Brisbane at the moment because the buying versus renting equation has now narrowed so far, that 2009 is now the best time in 10 years to buy property in Queensland."
While Hulcombe says experts haven't seen this trend materialise for investors in terms of figures just yet, it is a real threat for investors who rely heavily upon a strong rental return within the current climate.
George Kafantaris, Director, Metropole Buyers Agency Brisbane says investors with property renting above $1,000 are at risk of losing their tenant base as well - in this case to rises in unemployment particularly in the executive managerial market.
"Rentals in the upper bracket over $1,000 a week, leased to executives who are at a higher risk of losing their highly paid positions are beginning to see signs of stress," says Kafantaris.
"Some tenants have left the market for good and those that remain are asking for particular exit clauses to be included in their rental contract in case they lose their job."
Areas to watch
Scott McGeever, president of the Real Estate Buyers Agent Association of Australia says property located along key transport routes, particularly train lines, will create good capital growth and rental yield potential for the future.
McGeever says investors will find these opportunities in 2009 in the north west of Brisbane in suburbs like Mitchelton, Caperer, Chermside, Aspley, and to the south towards Mount Cravat and Mansfield.
"These suburbs are all reasonably priced and the overall property growth including yield has the potential for an upswing," he says.
"This is because these areas to the north and south of the Brisbane CBD are planned to be part of a transport orientated development under the south east Queensland regional plan, and will benefit from the infrastructure and gentrification injection."
The Brisbane market is unique in the fact that most tenants and homebuyers would prefer to live within 6-10kms out of the Brisbane CBD, out of the immediate inner city area.
With this in mind Kafantaris encourages investors to look into developing areas due to receive positive impacts from the construction of Brisbane's city tunnel project.
"There has been hundreds of millions of dollars spent and being spent by the Queensland Government on new inner city tunnels in an attempt to reduce peak hour gridlock. The city to Buranda tunnel spanning 4kms is one of these," he says.
"Buranda is also being re-zoned by the Government to allow five story dwellings to be built instead of just two stories. There is one developer who has gambled a billion dollars that Buranda will be Brisbane's new Newfarm, one of our current most trendy areas."
Kafantaris says that although these areas might look like a war zone at the moment in the midst of construction stages, investors should overlook that and, "if you know that the suburb is going to be an end route for one of those tunnels and it ticks all of the right boxes you've just got to go for it".
"Some of the other areas which have been positively affected by this infrastructure are Lutwish and Chermside and also Indooroopilly which is benefiting from other Government initiatives like re-zoning. These are all 4kms from the city," Kafantaris.
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