Vacancy Rate on the Rise
In an article for the website Property Update, Shannon Davis sheds light on the increasing vacancy rate. The property rates are rising and so should the rents. So why aren’t they? This, writes Davis, is because the hike in property rates enhances the ambitions of investors so capital growth definitely makes for an upward curve. The same cannot be said about the rental yield.
Difference between renting and buying has diminished
In the environment that we have today, buying a property is not that difficult. In other words, the difference between renting and buying a property has diminished. This has implications, after all!
Cause of fall in rental yield
Oversupply in many pockets of CBD means that there will be many more opportunities for the prospecting tenants and this will hit rental yields hard. As the cycle moves forward, capital growth will be affected and then, because the supply will have been eaten up, rental yield will rise again.
Tips for facing the “rental yield” dilemma
Davis writes that there are three recommendations to fight off bad rental yields. 1) Owners should look for reasonable rent. 2) Give your properties a facelift and 3) Maximize your online and offline promotions.
You can read the original article here.
Capital growth and rental yield
The concepts “capital growth” and “rental yield” are bipolar in nature. There is a place for both of them in a property cycle. These are times of crazy capital growth and the rate shall not mellow down for some time now. By the time we are through this phase, oversupply in many areas will have been absorbed. This will be a time best suited for the comeback of rental yields.
The construction industry and the labour industry have risen from a very deep sleep. They are presently working at breakneck speed and adding a lot to the already teeming number of houses. It is not hard then to understand why there has been a case of oversupply in many close-to-CBD pockets. Vacancy rates are also being affected by this trend.