Australia’s property market has been in a rental crisis for quite some time now, with asking rents soaring at a double-digit pace across the combined capital cities amid record-low vacancy rates.
The situation is projected to worsen with the federal budget aggressively ramping up its net overseas migration forecasts. However, this crisis for Australian renters is a big opportunity for investors to make substantial profits in the property market when the rent rises.
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The federal budget forecasts an unprecedented 715,000 net overseas migrants in 2022-23 and 2023-24, which will cause Australia’s population to rise by 2.18 million people in just five years. To put it in simpler terms, it means adding the country’s current population by an amount equal to five times that of Canberra or one time that of Perth.
Source: 2023 – 24 Budget: AUSTRALIA’S FUTURE POPULATION
The timing of this population boom was right at a time when Australia’s home-building sector was facing hardship due to increasing material and interest rate rises.
The supply & demand issue
There are now fewer and fewer builders available to meet the country’s property needs in light of the massive surge of migrants.
The new figures from the federal budget forecast that over the next five years, there will be an increasing gap between the building of dwellings and the population increase. The housing supply problem has been made worse by local and state government’s inability to approve enough new properties. The supply & demand issue is guaranteed to worsen as construction levels fall, while Australia is expected to see record population growth of between 400,000 and 500,000 people per year.
Source: Macro Business
The Nightmare for Renters
As the supply & demand issue is expected to worsen as construction levels fall and the population grows at a record rate, Australian renters could soon find themselves struggling to put a roof over their heads.
The demand for rental properties will continue to rise, and rental prices will keep skyrocketing, making it difficult for renters to find affordable homes.
Louis Christopher, who works at SQM Research, accurately described the situation to the AFR by saying that construction projects are being cancelled despite the high demand.
“I’m not sure how Labor can be that confident that they’re going to achieve their goal of a million dwellings being completed by 2029″, Christopher said.
“Overall, building approvals are very concerning”.
“The government needs to manage migration numbers. New home building catering for that population expansion will not be there”.
“This has significant ramifications for the ongoing rental crisis”, Christopher warned.
Big opportunity for property owners & investors
While the Australian rental issue is a nightmare for tenants, it creates a huge opportunity for investors in real estate when the rent goes up. With the property supply falling short and demand increasing due to the projected population growth, the property market is expected to remain competitive and in demand, leading to rising rents and higher property values.
Investors can take advantage of this situation by investing in properties that are expected to provide strong rental yields and capital gains. As the property market becomes more competitive, investors who can secure high-quality properties in desirable areas are likely to benefit the most.
The current property market also presents a unique opportunity for renters to explore becoming investors themselves. By transitioning from being a renter to a property owner, individuals have the potential to get out of the rental rush and build long-term wealth through property.
Owning an investment property also provides renters-turned-investors with more control and flexibility. They can choose to rent out their property while residing in another location, or even consider living in their investment property and reap the benefits of rental income from other tenants.
All in all
While Australian tenants are facing difficulty, investors have a great chance to benefit from the property market. As demand for rental properties continues to rise, rental prices will keep increasing, leading to higher profits for investors.
It’s a great time for you to invest in the property market as the demand for property continues to grow, whether you are renting or currently owning a home. So if you are looking to invest in the property market to build wealth, now is the right time to invest and take advantage of this opportunity.
Chat with our team at St Trinity today for all your property needs at (02) 9099 3412 or enquire below.