Australia's hottest rental investment regions

Rental demand is at record levels, and that’s good for property investors.

Summary: A state-by-state breakdown of where the renters are heading, revealing new pockets that property investors could consider. 

Key take-out: Greater supply of apartments in highly desirable suburbs seems to be satisfying demand from renters.

Key beneficiaries: General investors. Category: Property.

Property investors are not particularly popular at the moment. Politically, tax breaks for investors are in the spotlight and APRA has targeted investors specifically in its recommendations to banks.

There is no doubt that investors drive up prices – more buyers in the market will do that. The extent to which they do, however, is difficult to determine. But, what’s not in doubt is that having so many investors has led to low growth in rental rates. For people leasing property and not looking to buy, it has been a positive.

Buyer demand is at an all-time high, driven by low interest rates, strong capital growth, and in some locations, simply a shortage of housing. Given the backlash against investors, what is surprising is that rental demand is also at an all-time high.

While this partly may have to do with affordability and people not being able to get into the market, what is also likely is that it is being driven by jobs growth. The times when people rent are typically when they are younger (prior to buying their first home) or when they move cities. People moving to a city for the first time typically don’t buy straight away.

What states are seeing the highest demand from renters?

We are seeing the most demand from renters right now in Tasmania, ACT, Victoria and New South Wales. For this reason, it is likely these states would support more investors than in other locations. The reasons differ for each state. Victoria and NSW are experiencing the strongest economic growth at the moment and with that growth comes jobs, mostly in Melbourne and Sydney. Both cities are also relatively unaffordable to buy into, so why not rent?

ACT and Tasmania are more surprising and should be looked at more cautiously because they are smaller markets. The ACT is a market that attracts a large number of renters given that many people don’t plan to stay indefinitely when accepting a job. For that reason, Canberra is a city that needs a much higher level of investment housing than other cities.

Tasmania is also among the top states for buyers and this perhaps reflects higher jobs growth than is actually being reported, or otherwise a prolonged period of undersupply of housing.

What suburbs are we seeing high levels of demand from renters?

We measure demand based on the number of people looking to rent relative to listings. High rental demand suburbs are those where there are far more people looking to rent compared to available properties. This is based on more than 6.3 million visitors to our site every month, which gives us a clear indication as to where property demand is in Australia.

New South Wales

The list in NSW is surprising in that it doesn’t include suburbs that we see as typically popular with young renters. This is a distinct change from last year when places like the inner west and lower northern beaches featured more prominently. It is possible that affordability is a factor here as northern beaches still feature but demand has moved north to Cromer and North Narrabeen. The other surprise is Bellambi, which is a suburb in Wollongong. Wollongong suburbs are starting to appear in our most popular list of suburbs for buyers as well.

Victoria

Inner suburbs seeing relatively low levels of development continue to make the top renter list, including Clifton Hill, Caulfield East and Fitzroy North. The inclusion of a Geelong suburb is new but also reflects a growing interest from buyers and renters in this part of Victoria. Suburbs close to the train line to Melbourne are the preferred locations.

Queensland

The Gold Coast continues to be the top location for renters, not just in Queensland, but also nationally. Most recent population growth figures confirm that a large number of people are moving to this location. Lifestyle and affordability appear to be drivers but there is no doubt the availability of jobs is also key.

Western Australia

Challenging conditions continue in Perth however there are areas seeing elevated demand from renters. Northern suburbs such as Trigg and City Beach continue to feature strongly, as does Mount Claremont.

South Australia

While buyer demand remains very inner suburban focused, or alternatively close to the beach, renters in Adelaide are looking more broadly. It is likely that availability of properties is a driver here with high levels of apartment development in inner areas of Adelaide likely to have satisfied demand from renters.

Tasmania

Hobart is seeing very high levels of rental demand, likely reflecting moderate population growth and very low levels of development. It appears that the more affluent suburbs are seeing higher demand with Dynnyrne sitting at number one.

ACT

Northern suburbs continue to dominate the top renter suburbs list for ACT. The ACT is one of the strongest rental demand markets in Australia. It is also one of the most diverse, which is not as dominated by young people, but also established families. The type of rental housing that needs to be provided is far more diverse.

Northern Territory

Darwin suburbs continue to dominate top rental demand locations however Alice Springs is starting to emerge. It is uncertain why this is the case. Possibly there is some jobs growth, or alternatively, the popularity of Darwin may be diminishing.

Affordability and a hunt for lifestyle are the key drivers of demand for buyers. For renters, historically lifestyle has been generally a far greater driver. This appears to be changing for a number of reasons. Greater supply of apartments in highly desirable suburbs seems to be satisfying demand from renters. It is however affordability that is a factor as well with many suburbs, particularly in Sydney, outpricing potential renters.

 

 

 

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