RENTAL GROWTH

May 03, 2017
Michael Matusik

Measurement.  Part 3 – Again, it’s important to understand what’s being measured.

Go here and here to revisit parts 1 and 2.

This Missive, let’s ponder rental growth.

The origin of this post came from a media piece I saw a few weeks back.  Singled out in this media article were postcodes 4010 (Albion) and 4064 (Milton/Paddington).

They were special, apparently – premium locations that are above the norm.   I like both locales.  Well, Paddington much more than Albion, to be honest.

But the reasons given in the media article were just plain bollocks.

Below is a summary of the two-bedroom apartment rents for the inner Brisbane postcodes and their corresponding change in the number of new apartment bonds lodged.

You get it.

Housing markets, at the local level, are heavily influenced by supply and demand.

The superficial lifts in weekly rents in postcodes 4010 and 4064 are a reflection of the number of new apartments settled in those locations over the last 12 months.  For example, the number of new apartments for rent in Albion has increased by 75% since early 2016.

Many of these new apartments rent for more than the older stock.  Incentives are also in place to attract tenants at the promoted (and often inflated) rents used to help attract an investment sale.

Furthermore, rents for older apartment digs, in many locations across inner Brisbane, including the two magic postcodes mentioned above, are starting to slide.  This is what happens when new rental supply is ramping up.  Some 5,500 new rental apartments are up for rent across inner Brisbane over the past 12 months.  Revisit our table.

The vacancy rate in postcode 4010 is currently 7.5% and for postcode 4064 is about 5.9%.  Revisit here.

The aim of this Missive is threefold:

  1. When looking at rental growth, one must check what has happened to supply. Are we comparing apples with apples?
  1. Instead of regurgitating the media release, I wish more journalists would check out the validity of what has been issued and the reasons given as to why something is happening.
  1. Also, what we need here is a common rule for measuring rental growth.

That, however, can only come from sampling and, as when it comes to capital growth, by looking at the same set of apartments over time.  Substantially renovated apartments also need to be excluded from the sample set.

This, however, is somewhat hard for the layperson to do.  We do it when it comes to consultancy advice work, but it can be very time consuming.

A good proxy is asking rents.  SQMResearch supplies such as a service.

To better understand what is really going on in Brisbane’s inner city apartment market, go here.  Our comprehensive report covers all 16 inner city postcodes and covers ten key components of the apartment market. 

“Thanks Michael, you have been a great consistent adviser and supporter to our industry.  Much appreciated.” Neil H

Keen to hear your thoughts.

Until next time,

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Michael Matusik

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