Too Many Units, Too Few Tenants!

This interesting article appeared in the Weekend Financial Review’s property section last weekend, (March 15/16). We thought you might be interested.

The article warns investors of the traps associated with buying an investment unit in a market where supply outstrips demand.

The cities mentioned with inner city vacancy rates in excess of 6% were Perth and Brisbane. Both cities in mining boom states, where the mining sector has slowed significantly.

In the articles, Louis Christopher, head of SQM Research says, “It is very alarming”, he says the building binge in Perth has continued after thousands of itinerant miners have packed their picks and shovels and gone home!

The article further states that “For investors it should be obvious that when supply massively outstrips demand, there’s going to be a big impact on apartment values and rent. The growth in value of apartments is a miserable 1.7%, 10 basis points below the inflation rates, which means the real value of property is falling by about 1% a year.”

Here at Bernie Kroczek Real Estate, we can concur. We have seen inner city units stay of the market for much longer than say, the last few years. Apartments becoming vacant at the moment, which were receiving very good rents, are struggling to find tenants to even view the properties. Rents, therefore, have had to fall back to compete for the reduced numbers of people looking to rent an apartment in the city.

Landlords, who have had a very good run with rents while at the same time enjoying record low interest rates, will now have to tighten the belt and ride out this latest dip in the property cycle before the next upward trend, which could be some time away.

To read the full article Click Here.

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