It has not been an easy 12 months for property investors, with home price growth and rental yields slowing to a crawl.
Now, investors are being warned that rental yields could fall further in 2016.
According to the latest CoreLogic RP Data Rental Review report, Australia’s combined capital city weekly rental rate was $485 in February after recording no growth over the previous 12 months.
Cameron Kusher, CoreLogic RP Data research analyst believes there is a possibility that rental rates could fall over the next few months.
“The cause of this current slowdown in rental growth is falling wages, excess rental supply in certain areas and lower rates of population growth and population mobility impacting on demand for rental accommodation,” he said.
Although the national rent has not changed over the past year, individual markets have seen a range of results.
Melbourne, Sydney and Canberra have all seen growth in rent. Melbourne has risen by 2.2%, Canberra by 1.6% and Sydney by 1.6%.
However, global credit agency, Fitch Ratings, believes this may not last.
According to a new report, “In Sydney and Melbourne, price appreciation in recent years has outpaced wage growth – which leads to decreasing levels of affordability.”
The rest of the capital cities have not seen any growth over the past year, with Perth seeing a decline of 8.4%, Darwin with 13.3%, Adelaide with 0.4% and Brisbane with 0.7%. Hobart was the only city to see no change at all.
If you are concerned that the rental return on your investment property may start to decline, there are a couple of things that could help. Listed below are a few quick tips that could help boost your rental yield and see more money in your pocket.
Quick tips to help boost your rental return
• Be pet-friendly. You will be expanding your potential tenant pool significantly, helping to reduce vacancy periods and you may also be able to charge more for rent as you are offering something extra. You can also implement certain provisions, such as periodical carpet cleaning, if you are worried about damage to the property.
• Self-manage. If you employ a property manager to look after your investment property, take a look at how much they charge you and what their responsibilities are. Would you be willing and able to take on this role yourself? If so, that’s hundreds of dollars back in your pocket.
• Maximise tax deductions. Chat with a professional tax accountant who specialises in property investment to be sure you are claiming all available deductions.
• Are you charging enough? Although there has been no national movement on rental growth, you may find that your area has changed over the past few years. Do your research and see what your local market average is. You may find that you are actually charging less than other similar properties on the market.
• Refinance your home loan. When was the last time you compared your home loan to what is on the market? You could increase your rental income simply by switching to a more competitive home loan and reducing your interest expense.
If you can find a better home loan product which will cost you less, then more money will go back into your pocket. At State Custodians, our Lending Specialist team can go through the range of home loan products to find the right one for you. Give our team a call on 13 72 62 or leave your details here and they will contact you.