Today we’re covering the rise of the renters! Louis is going to take us through the history of property, looking at Sydney, Melbourne and Brisbane in the 70s, 80s, 90s and trends into 2017.
In this episode we cover:
- The rise of renters
- What power tenants have
- What landlords can do to counteract that
- Yield – leading into next week’s episode
Also, if you didn’t mind this episode (or even maybe liked it!), please leave a review for us on iTunes here.
It’s 2017, and there are lots of news articles coming about covering renting. So today we’re going to talk about the year of renters, going through a few different points, more specifically we’re looking at affordability and demographics.
Property Trends in 1970’s
In the 70’s, people started flocking to the outer suburbs because the cities started getting expensive. Something that is a 15-minute drive to us now, that’s considered inner ring now was previously considered outer suburbs.
In the city centre you had a strong population living there, then in the outer suburbs – like Sydney it would be Newtown, Melbourne – Carlton and Brisbane – Fortitude Valley, they were semi-industrial with a lot of manufacturing plants.
Then, people moved in the 70s to those outer suburbs. So you had a three ring system, people living in the city, in suburbs living directly outside then the suburbs immediately after that.
Property Trends in 1980’s
In the 80’s, a lot of people started moving back into the industrial areas, more so the low-income individuals. Sort of like Marrickville in Sydney and Fortitude Valley in Brisbane.
Property Trends in 1990’s
In the 90’s, the semi-industrial areas were then redeveloped, which lead to the lower income individuals being squeezed out, who then moved to the outer suburbs.
- The semi-industrial areas were redeveloped into residential areas.
- Brisbane – Fortitude Valley, Milton
- Sydney – Newtown, Marrickville
Property Trends Now!
This leads to where we are today, when the population is increasing. People started moving further and further out because there weren’t too many areas that were affordable and it got worse over time. The population has changed a lot over the past 40 – 50 years.
A HILDA Survey has found that traffic has become worse and worse. The percentage of people travelling more than 90 minutes a day in 2002 was 12% then in 2008 it went to 17%. That’s only a five year period and was almost 10 years ago. Today, they’d be even worse. Infrastructure hasn’t kept up with population growth, which has caused people to start renting more which lead to the rise of the renters… Or rentvesting.
For the first time, we’re at record-low for first home owners. It’s the story of Sydney and Melbourne where property prices are going up so rapidly that people can’t afford it. More Australians don’t own property than those who do.
65% of people buy property for stability, somewhere to live in. But if you want to buy property, don’t do it for an investment, going forward there will be a tenancy law review.
The silver lining:
There are opportunities where you could be renting for a lot lower than you’re paying on the interest.
While demographics have changed, people still want to live near the city. We went through Core Logic data about property prices and apartments in Brisbane, which has found that they are at a flat and are likely to keep going down.
So if you’re on the renting side of things, as the price of that apartment goes down, people won’t be able to charge so much rent because there will be more places to buy. Therefore the overall rent of inner city apartments could go down. However, you still want to consider some investments because with renting, you have nothing to show for it at the end of the day.
Look at these trends and what’s happened in the past and follow it. There are opportunities in every market but be clear on what you want to do, who you want to rent it to and what’s your goal going forward.
In next week’s episode, we will cover rental yield and cash flow opportunities in property. There are a number of different classes of investment you can look at.
When the price goes up and rent stays the same, yield goes down. The potential for rent to go up a lot doesn’t look like it’ll be there because of the parliamentary pressure. So look at markets that have the yield and opportunity – that have the supply like a high demand suburb.
The population has changed, demographic has changed but employment hasn’t, in a sense that people still want to work in the city, therefore live close by. If you rent and you’re okay getting over the psychological issues of not owning your own home and living in it, you can look at other areas which will make a better financial investment over the long term instead of just buying places to live in.
The Rentvesting Podcast, available on iTunes, was created by Red & Co’s Jayden Vecchio and expert financial planner Louis Strange. Together, Jayden and Louis unpack the facts behind the property market, explain what’s really going on & where the market is heading. They believe in challenging the status quo and want to get out there to educate absolutely anyone looking to enter the property market.