Rental Returns - from RP Data Property Pulse

"... During the five years to September 2010, the Australian residential property market has experienced a variety of conditions, modest growth conditions in 2005/06, rapid appreciation in 2007, falling values in 2008 followed by another strong growth phase in 2009/10. Despite the range of conditions over this five year period, overall property values have increased at the average rate of 7.1% year on year. ...

In dollar terms, house values have increased by a total of almost $140,000 over the last five years and unit values have increased by approximately $123,000. ...

Over the same period rental rates have also ramped up and, similar to the capital gain performance, the growth has not been uniform from year to year. Between September 2005 and the end of 2008, rental rates were typically trending upwards at the rate of almost 11% year on year. In 2009 capital city rents increased by just 0.9% and we are now seeing the first evidence of rental growth once again returning to the market. ...

For units, Darwin has again recorded the strongest value growth during the past five years (99.8%) followed by Adelaide (69.6%). Unit rental growth has well and truly lagged in Sydney (27.8%) and to a lesser extent also in Brisbane (44.8%).

Unit rental growth over the last five years has also recorded significant increases in Darwin (84.0%) and Perth (61.7%). The three largest cities have recorded the lowest levels of rental growth at 39.6% (Melbourne), 40.6% (Brisbane) and 42.8% (Sydney). ...

Overall the results highlight the virtues of having a long-term hold strategy in relation to property purchases with property values, rents and subsequently yields having historically proven to increase over time. Over the next 12 months we are anticipating fairly flat growth in property values however, we do expect that rents and yields will improve. With an insufficient supply of homes, upwards pressure will remain on housing prices over the long term, however price inflation will be offset by affordability constraints which will hamper prospective purchaser’s ability to enter the residential market.

As a result, competition for rental accommodation is likely to intensify and weekly rents will rise. These conditions highlight just how imperative it is that Government’s find a solution to housing supply issues, as the national graphs highlight, over the last five years conditions have been such that either property values have increased, rental rates have increased or both have been climbing. Supply is clearly a large contributor to these prevailing conditions."