With the Spring market in full flight now we haven’t seen the massive increase in good quality stock that every agent has been promising.
We have heard for months that there is so much property in the pipeline that it will flood the market, what we have seen is more of the same. Poor quality investment grade property being sold.
Over the weekend we saw a consistent clearance rate of 74% but the big number no one talks about is the difference between scheduled auctions and reported auctions.
As discussed previously there are a lot of reasons that an auction is cancelled or postponed, mainly a lack of interest.
Scheduled Auctions
1240
Reported Auctions
638
Total Sold
472
Total Passed In
166
Clearance Rate
74%
In the past I have discussed the pros and cons of industrial property and why it is becoming an attractive investment option, but it’s not necessarily replacing residential property.
In fact, experts suggest that residential properties still have better prospects in the post-COVID market. This is because residential properties offer a guaranteed income and consistent returns, although they may not be as high as commercial properties. This is mainly based on the premise that we have a housing shortage especially in Victoria where we have an undersupply of rental properties especially homes.
That being said, industrial property has its advantages. For instance, it typically offers longer leases, less administration, and limited outgoings, which can be beneficial for investors.
Additionally, industrial properties can provide rental yields between 5% and 12%, compared to residential properties’ 3-4% yields.
Key differences between industrial and residential property investments:
– Lease length: Industrial properties have longer leases, often ranging from 5 to 15 years.
– Vacancy periods: Industrial properties tend to have longer vacancy periods.
– Maintenance costs: Industrial properties can be costlier to maintain due to their larger size and complexity, although it must be remembered that some costs can be recouped from the tenant.
– Industrial properties can be costlier to maintain due to their larger size and complexity, although it must be remembered that some costs can be recouped from the tenant.
– Tenant pool: Residential properties have a larger tenant pool, driven by migration and population growth.
Ultimately, whether to invest in industrial or residential property depends on your individual circumstances, risk tolerance, and investment goals. It’s essential to weigh the pros and cons of each option carefully before making a decision.
Victoria’s Residential Tenancy Act has indeed made some significant changes that may have driven investors out of the market. The Act, which came into effect in 2021, aimed to make renting fairer and safer for tenants. However, some of these changes may have unintended consequences for investors.
Key Changes Affecting Investors:
– Ban on ‘no specified reason’ notices to vacate: Investors can no longer end a rental agreement without a valid reason, making it harder to manage their properties.
– Increased regulations and penalties: Stricter rules around repairs, maintenance, and minimum standards may lead to higher costs for investors.
– Rent control measures: Limits on rent increases and stricter rules around rent bidding may reduce investors’ potential returns.
– Increased tenant rights: Changes to eviction processes and notice periods may make it harder for investors to recover possession of their properties.
These changes may have led some investors to reconsider their involvement in the Victorian residential rental market and encouraged some to look at investing at industrial property leading to a further increase in residential property shortages.
