Brisbane's rental market, Brisbane's sales market, Woolloongabba

Money in the bank? No thanks!

inner city apartmentsOpen the paper today and you’re flooded with offers of 8.1% this and 8.25% that – just lock your pennies up for a year or more. It’s tempting many investors who’ve sold out of other assets, and especially those that want simple security. Meantime though there’s a very bright spot for investors who’ve kept their money in property – rents are rocketing up.

Brisbane’s just recorded another big jump, with the June Quarter showing a 6% rise in median rents for 2 bed apartments. The inner-city suburbs leapt 9%, and yes that’s in just three months. Suburbs like New Farm, the Gabba and Albion all clocked double-digit growth so this is without doubt a boom market. Three bed houses are also up 5% in the inner city and the cause is ‘nose on your face’ stuff: we don’t have enough rental homes. There’s now less properties in the total rental pool than this time last year – in the CBD itself we lost 399 rental homes for the year. (A 2 bed apartment in postcode 4000 now rents for $520/week!) Owner-residents continue to soak up apartments and there’s ongoing conversions to short-term “holiday” leasing.

Commentators often look to gross return figures to kick-start a market. Once the yields rise high enough investors seem to prick their ears up, with 5.5% often considered the ‘hurdle rate’. So here’s three of our current sales listings: 6.2%, 6.4% and 6.8% (the annual rent divided by the price) – and they’re all modern city apartments priced under $550,000. Prices have been flat for a few months now so with rents rising fast these new, strong yields should be no surprise. It’s simple maths.

These are gross returns of course so they aren’t comparable to the bank’s 8%. But if you believe there’s capital growth to come the holding costs for today’s property owner can be pretty minimal. It’s not often we see this meeting of two such extreme markets, with sales prices flat and rents surging ahead at record rates. There’s a good choice for buyers today but that may be short-lived as sellers have stopped flooding the market. The latest RPData stats show new listing numbers have been trending downwards since early May.

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