WILL RENTAL PRICES INCREASE IN THE NEAR FUTURE?
Tammy from Facebook asks:
“What are your thoughts on the property market over the next 12-24 months with all these new investment lending changes? In particular, will rental prices increase due to investors wanting to put them up from the increase of the interest rates, and will capital growth slow down because of the new lending restrictions on investors?”
Towards the end of last year, the Australian Prudential Regulation Authority (aka APRA) introduced lending restrictions for property investors, that would make it slightly trickier to gain finance. In response, many lenders have changed their serviceability requirements and upped interest rates on investor loans. Economists and investors alike are now speculating on how the changes will affect the property market. Here are Nathan’s thoughts.
Nathan has always been an advocate of investing in metropolitan areas. Unlike a lot of regional areas that have blown up and then deflated in-line with the mining boom, metro areas are much stronger and carry less risk.
SYDNEY MARKET RENTAL PRICES
In terms of growth, many are predicting the Sydney market to stay relatively flat over the next 12-24 months, but just because investor demand in this market is lower than before, it doesn’t mean prices won’t rise. The APRA changes were introduced to allow more owner-occupiers to enter the market. This means there is still some growth to be had.
Nathan predicts a rental boom in Sydney. Recent data from Blink Property Management suggests rents are beginning to creep up, with a full-blown increase expected in 12-24 month’s time.
BRISBANE AND GOLD COAST MARKET RENTAL PRICES
Metro areas in Queensland are still in the early stages of booming. Rental rates don’t look ready to rise any time soon, but growth is continuing to increase. Nathan doesn’t expect lending changes to significantly affect these markets.
REMEMBER THE GFC?
During the Global Financial Crisis of 2008-2009, the Australian Government dropped interest rates to 1% a month for three consecutive months in order to keep the economy afloat. The recent APRA changes were brought in to curb growth – particularly in markets like Sydney and Melbourne – in order to avoid a GFC style crash similar to what happened in the US.
How have the APRA changes affected your investing? Please share your experiences in the comments section below.