REVIEW SEP. 2020 Annual Rent Reviews September 2020

MAGAZINE EDITION September 2020

Rent reviews Will your next rental review increase next month?

Arjun Paliwal Rental market = Demand without speculation.

Top 10 Regions Highest and lowest vacancy rate regions profiled. RENT REVIEW SEP. 2020 Annual Rent Reviews September 2020

Decreas e Decreas 33.8% e 39.9% Increas Increas e e 48.1% 49.5%

No change No 16.7% change 12% Suburb Price Change Suburb Price Change Houses Units

Suburb medians are often volatile, so we always recommend verifying the trends at an Sa3 level NATIONAL and looking at other supporting metrics including RENT REVIEW lease days-on-market, vacancy rates and the count of rentals still listed after 21-days. SEPTEMBER If these metrics all suggest the market has 2020 softened compared to the same period -12m ago, then this evidence would suggest a decrease in rental price is likely. In September, we think this is Each month we forecast rent reviews. likely for around 34% of suburbs for houses and This is based on the selection of 40% of suburbs for units. statistically sound suburbs, then using machine learning we forecast Increases in rents are expected in around 50% of +2m from our last full month of data. suburbs for houses and 48% of suburbs for units. This is compared to the same period However considering the option of making no as at -12m with a percentage change rent adjustments for changes between -5% and +5%, 70% of suburbs for houses and 90% of (+/-) calculated. suburbs for units would stay the same as last year. Existing rental properties generally do not need a second comparative market analysis. Knowing the overall market trend and adjusting the current rental price is all that is needed in most cases.

Using monthly data including median RENT prices, vacancy rates and days-on-market, we can predict rental price changes. These predictions can be +1 month or up to +12m REVIEW using additional economic and population data.

M a c h i n e l e a r n i n g c a n n o w h e l p w i t h 1 2 - m o n t h r e n t a l r e v i e w s . Short-term predictions have proven more statistically accurate, especially where rental volumes exceed 5 listings per month. Simply enter the suburb and view the results. N O M A D I C | 2 4 5 EASY WEBSITE ADD-ON IDEAS FOR PROPERTY MANAGERS

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Click this link and use the embed code < / >. TOP 10 RENTAL MEDIAN FALLS Aggregated by Sa3 Region Decreases (%) in weekly median 12m to July 31st 2020. Min 50 average advertised rentals. H = Houses U = Units

12M MEDIAN RENTAL FALLS BY SA3

Region Name Decline North Sydney - Mosman (H) -12% Eastern Suburbs - South (H) -9% Stonnington - East (H) -7% Leichhardt (U) -6% Rouse Hill - McGraths Hill (U) -6% Leichhardt (U) -6% Port Douglas - Daintree (U) -6% Palmerston (U) -6% Strathfield - Burwood - Ashfield (H) -6% Eastern Suburbs - North (U) -6% TOP 10 RENTAL MEDIAN INCREASES Aggregated by Sa3 Region Increases (%) in weekly median 12m to July 31st 2020. Min 50 average advertised rentals. H = houses U = Units

12M MEDIAN RENTAL INCREASES BY SA3

Region Name Increase West Pilbara (H) +33% Gladstone (U) +16% Gladstone (H) +10% Albury (U) +9% Port Stephens (U) +8% Launceston (U) +7% East Pilbara (H) +7% Brisbane Inner - East (H) +7% Mackay (U) +7% Bendigo (H) +6% DEMAND WITHOUT SPECULATION Looking out for the next property "hotspot" can be exciting, exhausting, and at the same time dangerous for your finances (should you get it totally wrong). As buyers try to find the perfect market, the discussions start firing away around demand and supply and why in their eyes this area may increase in value faster than another. It's at this point the attention is all on the "purchasing" market, whilst the "rental market" gets left behind.

Why is that the case?

"Speculation.."

ARJUN PALIWAL

When someone enters the world of Many Oxford studies talk about rent Rental analysis is often confused making a property purchase, the being the purest measure of true with "cashflow analysis". They are in demand being displayed has one demand, as it has no speculation fact two very different things. It's extra goal beyond the actual involved. this confusion though that has purchase or the fundamental need people only focussing on what they for shelter itself. That is, most of us Whereas property prices have a feel is a "growth driver", because it is want the property value to go component of "hoping it goes up". I always a growth vs up. We don't always purchase it for can't think of a moment whilst cashflow thought that comes up. the location and/or property alone. renting, where I have wanted to rent out a property in a location, hoping Cashflow analysis: Understanding This is where property demand can the rent goes up. How strange the money you will make from partially be tainted with speculation, would that be...? rental income minus expenses. which is what can also be responsible for the mistakes many Paying attention to the rental Rental analysis: Understanding the investors make as they only focus market is not only going to give you health of the rental market e.g. Are on price related fundamentals. a clear picture of actual demand, but you likely to get a tenant fairly it will help you hold the asset for the quickly, are rents rising for the Looking at the rental market is a long term. Irrespective of the times suburb, how easy is it to hold this great way to measure demand for we are in now, the strength of real asset, could you potentially raise an area without the speculation. estate as an investment when rents on your property based on holding for the long term is clear. where it is now etc...and more. This is why the rental analysis matters a lot! "Many Oxford studies talk about rent being the purest measure of true demand, as it has no speculation involved"

With all that said, here are 11 5. Outright ownership = high 9. Supply pipeline = total building indicators that I feel should be on outright ownership, will reduce approvals from the last 15 months, your radar as you analyse the rental distress in rental campaigns or need divided by the total current market to find that true demand. to sell their owner occupier rapidly dwellings in the region. When this When adding this on to your greater which would change ownership type goes above 3%, higher incoming property purchasing research, it will within potential investors coming in. supply relative to demand is likely. no doubt significantly reduce your risk and further strengthen your 6. Rent to income ratios = 30% is 10. Rental yields = higher yields are due-diligence. the global benchmark for great for cashflow, however, when affordability. At this level or below is yields are “too high” they 1. Vacancy rates = properties ideal. Be careful of things that can substantially outweigh the cost of available for rent in comparison to skew data though e.g housing mortgages. There is a limit to how total investment properties in the commission, younger age groups in much more this can go, and as a region. (*there are various ways this patches of the region, and outdated result, at times rental increases start measure is tracked) data in a newer build area e.g census to get very limited. The long term in 2016 is very different to now if a average yield and rent rises are a 2. Rental days on market = how long lot of development has occurred. great way to see this. is it taking as a median or average from listed to rented. 7. Local market sentiment = attend 11. Job diversity = Are the rental a few opens, speak to various trends changing simply due to one 3. Stale listings= total number of property managers, ask for example key industry strengthening, mining rental properties staying online for addresses. is a great example of this. more than 21 days. 8. Postcode acceptance = Do the As you search for your first or next 4. Rental ownership = too many banks like it? Most reasons don't, are investment property, it is very investors owning assets in that usually to do with rapid supply important that you add a layer of region can create a risk of many changes, vacancy or sales issues, rental analysis to your purchase. rentals coming up for rent at a given and too little sample sizes e.g very Infrastructure projects, the time period. However, data very small locations. economy, and prices are all great, anomalies can occur here e.g you however, without the rental analysis may buy a house, but the suburb has there are elements of speculation many investor owned units which and you also risk the potential of will change suburb stats. experiencing difficulties when it comes to owning the asset for the long term. VACANCY RATES HIGHEST 10

Aggregated by Sa3 Region Min 50 average advertised rentals as of August 2020.

HIGHEST VACANCY RATES

Region Name (%) Melbourne City 19.4% Adelaide City 13.3% Brisbane Inner 11.6% Sydney Inner City 8.1% Stonnington - East 7.5% Whitehorse - West 7.2% Pennant Hills - Epping 7.0% Ku-ring-gai 6.9% Auburn 6.8% Stonnington - West 6.8% VACANCY RATES LOWEST 10

Aggregated by Sa3 Region Min 50 average advertised rentals as of August 2020

LOWEST VACANCY RATES

Region Name (%) Onkaparinga 0.3% Orange 0.4% Rockhampton 0.4% Marion 0.4% Playford 0.4% Lower Hunter 0.5% Lake Macquarie - East 0.5% Lake Macquarie - West 0.5% Jimboomba 0.5% Sunshine Coast Hinterland 0.5% We count the average amount of rental properties advertised for 21- days or more within a statistical area (Sa3). Both units and houses are VACANCY included in the one aggregate. We then express this as a percentage of total properties that are rented via a real estate agent, which is RATES data collected during the 2016 Census. Whilst most property managers and property owners prefer analysis down to the suburb level, this can often produce volatility, especially We take a look at 5 regions with where the total number of rental properties is low. To help counter this volatility, we also include analysis at both the Sa2 and Sa3 levels, some of the highest vacancy which are larger thats suburbs. rates and 5 with some of the lowest. Data used covers 12- An advantage of using Sa3 regions, especially for time-series analysis months to July 31st 2020. and predictive models, is the reduction in volatility. When looking at overall vacancy rates trends, we recommend looking at both the suburb and regional data, especially when analysing trends.

Median Price Median Price 12m Median Change 1.4% $350 $300 Median weekly house Median weekly unit 4.2% rental price. rental price.

Median Price Median Price 12m Median Change 1.3% $380 $275 Median weekly house Median weekly unit 1.9% rental price. rental price.

Median Price Median Price 12m Median Change 4.9% $320 $260 Median weekly house Median weekly unit 4.0% rental price. rental price.

Median Price Median Price 12m Median Change 5.0% $420 $320 Median weekly house Median weekly unit 3.2% rental price. rental price.

Median Price Median Price 12m Median Change 1.7% $295 $265 Median weekly house Median weekly unit 4.3% rental price. rental price.

Inventory Levels Vacancy Over 21 Rates days 6.6 0.4% 26 7.5 Calculated using listings Total house and unit Months of stock within > 21 days and total rental listings older than the Sa3 region by units properties rented by 21 days within the Sa3 and houses. real-estate agents. region. Sa3 Region Melbourne City (VIC) Suburbs include: Carlton | Docklands | East Melbourne | Kensington | Melbourne | Parkville | South Wharf | Southbank | West Melbourne

Median Price Median Price 12m Median Change -3.1% $630 $520 Median weekly house Median weekly unit -1.9% rental price. rental price.

Inventory Levels Vacancy Over 21 Rates days 10.3 19.4% 5,401 0.5 Calculated using listings Total house and unit Months of stock within > 21 days and total rental listings older than the Sa3 region by units properties rented by 21 days within the Sa3 and houses. real-estate agents. region. Sa3 Region Adelaide City (SA) Suburbs include: Adelaide | North Adelaide

Median Price Median Price 12m Median Change 4.3% $480 $430 Median weekly house Median weekly unit 1.2% rental price. rental price.

Inventory Levels Vacancy Over 21 Rates days 10.6 13.3% 406 3.0 Calculated using listings Total house and unit Months of stock within > 21 days and total rental listings older than the Sa3 region by units properties rented by 21 days within the Sa3 and houses. real-estate agents. region. Sa3 Region Brisbane Inner (QLD) Suburbs include: Brisbane City | Fortitude Valley | Highgate Hill | Kangaroo Point | New Farm | Petrie Terrace | South Brisbane | Spring Hill | West End

Median Price Median Price 12m Median Change -4.3% $550 $450 Median weekly house Median weekly unit 0.0% rental price. rental price.

Median Price Median Price 12m Median Change -4.4% $825 $650 Median weekly house Median weekly unit -2.9% rental price. rental price.

Inventory Levels Vacancy Over 21 Rates days 4.2 8.1% 3,006 2.1 Calculated using listings Total house and unit Months of stock within > 21 days and total rental listings older than the Sa3 region by units properties rented by 21 days within the Sa3 and houses. real-estate agents. region. Sa3 Region Stonnington East (VIC) Suburbs include: Kooyong | Malvern | Malvern East

Median Price Median Price 12m Median Change -6.7% $700 $420 Median weekly house Median weekly unit -2.3% rental price. rental price.

Inventory Levels Vacancy Over 21 Rates days 5.7 7.5% 303 2.6 Calculated using listings Total house and unit Months of stock within > 21 days and total rental listings older than the Sa3 region by units properties rented by 21 days within the Sa3 and houses. real-estate agents. region. suburbtrends.com