Analysts are concerned about a possible oversupply of units in Sydney and Melbourne but some experts believe that there is even a shortage of unit rental stock in these areas. Rental supply is predicted to decline but rental demand will likely skyrocket. Apart from the new investment property depreciation rules, this can be good news for property investors.
Foreign investor property purchases in Sydney and Melbourne are declining because of the recent slowing down of price growth and stricter restrictions, increased stamp duty and other new penalties imposed by the government. Local investors are also being restricted by APRA’s lending restrictions that’s why some property investors are being refused of housing finance while others are having a hard time maintaining their portfolios.
Because of the aforementioned developments, investor-owned properties in Sydney and Melbourne are expected to decline further and less rental stock will likely be available to renters. First home buyers still cannot afford to make the deposit required to purchase a property so they would still have to join the migrants in looking for rental properties.
According to the ABS, two thirds of Sydney’s new residents and more than half of Melbourne’s population growth come from overseas as migrants. The rapid increase of house prices followed by a rise in rental demand because of overseas arrivals and frustrated first home buyers could lead to a huge shortage for rentals but not purchases. This means property investors could benefit from massive rent hikes as housing prices stabilise in the next few years.
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