Experts predict rental prices in Geelong will rise as landlords group pushes for increases – realestate.com.au

Long-term renters are facing frightening rent increases in Geelong, even as the city’s rental property market tracks inflation rates over the new decade, new analysis has found.

The figures show how the average rental price for homes in Geelong could rise from the current $525 per week to $750 per week by 2035.

That analysis is calculated based on average inflation in Australia, a long-term trend that the rental market has traditionally followed.

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But other factors could change the trajectory of rental prices, such as the impact of state government regulations, investors looking to recoup their losses from higher interest rates and other costs such as land taxes, or the extent to which the future pipeline of new homes flows into the rental market.

SQM Research founder Louis Christopher predicts a 1 to 3 per cent increase in rental prices across Melbourne next year, lower than in interstate capitals, after the state government announced a series of reforms around the rental market.

But Mr Christopher noted that most larger Australian rental markets track fairly closely to the consumer price index.

SQM Research Director Louis Christopher.

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Before the pandemic, this was almost 2.6 percent – ​​in line with the Reserve Banks’ inflation target.

“It should return to pre-corona levels, and that will eventually become a reality,” he said.

While more building should help prevent rents from rising much further, he still advised that renters would be better off buying a home if they could afford it.

“Yes, the market will pick up over the next year, but I think the way things have gone for renters who became first home buyers has been better than for those who remained renters, and I don’t see that changing anytime soon,” Mr Christopher said.

Maxwell Collins Geelong director Nick Lord said vacancy rates were at their lowest as the series of changes affecting property investors caused a clearing of equity investors.

Vacancy rates in Geelong remain historically low as investors exit the rental market.

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“Our company had four properties available to let at one point, which is the lowest vacancy rate I have seen in 25 years,” Mr Lord said.

“This shows a shortage of rental properties due to government compliance legislation, causing investors to leave the market en masse.”

Mr Lord said the government, while trying to protect tenants, was ignoring how supply and demand determine prices.

But more new investors were focused on the capital growth trajectory in Geelong, compared to existing landlords who saw declining rental yields due to rising costs.

Some landlords will be tenant-centric and conscious of how far they push rent increases to ensure they retain good quality tenants. Others just want to get a return on their investment so will try to raise rents, Mr Lord said.

Ben Kingsley, chairman of the Property Investors Council of Australia, said landlords should pursue rent increases above the CPI to recoup rising costs.

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Ben Kingsley, chairman of the Property Investors Council of Australia, said they were advising members and all landlords across the country to target rent increases well above the CPI.

“If conditions are such that vacancy rates are low, we encourage our PICA members and all landlords to increase their rents by 4 to 5 percent, as long as land market conditions allow this,” Kingsley said.

“To rebalance their investments. And if governments continue to raise taxes and raise costs, we will go even higher to recommend 5-6 percent.

“And we think this is a very reasonable response to achieve a return on our investment that we are not currently getting.”

New analysis shows how far rental prices in Geelong could rise if they followed the average inflation rate.

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However, he said that if the government’s plans to increase the supply of housing in the country were to materialize at a level that improves or even puts housing affordability problems on hold, investors would struggle to increase rental prices.

Mr Lord said while overseas and internal migration would continue to increase rental demand in Geelong, the city’s growth corridors such as Armstrong Creek would help fuel that growth by building more homes.

“I think we are going to build houses and land parcels at the right price to give people affordable rents,” he said.

Investment properties typically make up 25 percent of new homes built in suburbs of growth areas, he said.

“I think Geelong is undervalued, so people aren’t even worried about interest rates, long term or short term. They just want to jump into the market,” he said.

with Nathan Mawby

GEELONG’S 10-YEAR RENT FORECAST

Source: Median home price, rental data from PropTrack. Forecasting growth based on the average CPI. Figures for houses.