Armidale Property Management Wrap Up September 2021

September produced another strong month in the Armidale rental market. Professionals Armidale remain consistent with our vacancy rate, hovering around 1%. Our property management team leased 28 properties during the month, a great start to the spring season. We have now witnessed multiple investment properties achieve a 10% price increase when taking on a new tenancy during this year. For example, 2 Mason Court is a 4 bedroom, 2 bathroom and 2 garage property that was successfully leased with a $60 price increase from $400 to $460 per week.

This historically low vacancy rate, along with the drastic rental price increase for our region, has stemmed from a supply shortage of rental properties. The main factor for this shortage is the false economy the government has created, by causing a housing boom off the back of huge first home buyer incentives. Due to the significant price increase the New England is witnessing in the sales market a large number of landlords are cashing in their investment properties. However, the majority of these investment properties are being bought by first home buyers as the price point of the investment stock generally sits ($350,000 – $450,000) at the same price point that first home buyers are targeting. Every time a first home buyer purchases a property for their primary residence, it reduces the rental property supply. This is simple supply and demand.

“Our property management philosophy is simple – to minimise arrears, vacancies, and expenses, and to maximise your return”

As tighter lending rules to somewhat slow down the housing market boom look to be implemented, what effect will this have on the rental market?

The Australian Prudential Regulation Authority (APRA) said the impact of a higher serviceability buffer is likely to be larger for investors than owner-occupiers. That was because, on average, investors tend to borrow at higher levels of leverage and may have other existing debts, to which the buffer would also be applied. Lenders will now access a borrower’s serviceability based on at least a three percentage point increase which is up .5% from the current 2.5% buffer currently used.

Realestate.com.au economist Paul Ryan says the .5% increase will reduce the maximum loan amount by 5%. As mentioned above, investors tend to borrow at the highest levels in comparison to any other buyer pool. The question is, will this see a decrease in investment properties being purchased? If this were to occur, it would only add fuel to the fire of an already intense rental market as supply reduces even further.

For more read our monthly newsletter to landlords: Pro Arm Landlords Newsletter September 2021.

By Jamie Williams