Shortage of rental units good news for Melbourne investors
When considering a real estate investment, many factors contribute to the decision-making process.
Will the venture be profitable? What is the risk versus reward? How long will it take to get a positive return on the investment?
It is possible to narrow down your location choices by considering two simple factors – supply and demand.
Consider taking the time to determine an inventory of available residential units in the area you are thinking about investing in. If rental dwellings are in short supply, try to discover the reason why.
Sometimes construction of new buildings cannot keep up with burgeoning demand. Often, commercial projects monopolise the building market.
Combined with an influx of rental-seekers, the situation has the potential to shift the supply and demand equilibrium.
Whatever the case, more renters and fewer available properties equals a higher premium for space and a healthy profit for owners.
Recent numbers regarding rental rates in Victoria illustrate these conditions.
A report from the Real Estate Institute of Victoria (REIV) reveals that a substantial shortage in affordable housing is putting pressure on renters.
In one decade, Melbourne went from having roughly 14,000 affordable rental homes to around 8,700 – marking a 55 per cent reduction, which makes good news for Melbourne investors.
Melbourne investors should also know that the vacancy rate in the city is currently sitting at 2.4 per cent, significantly below the three per cent happy medium of supply and demand.
One drawback of such an appealing market is the competition you may get from other investors, which could drive up prices. However, keen observers just need to find the right opportunity to take action.
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