Now is the time of the Landlord Generation
Gen X? Gen Y? Millennials? Well in the property market we’ve hit the ‘Landlord Generation’.
This Landlord generation are investors expanding their property and in turn rental portfolios. Despite media reports of an oversupply, the Melbourne residential market continues to grow and given population forecasts there is no slow down.
The end of the financial year will herald the end of major stamp duty benefits to local hardworking investors as the Government continues its rampage on slowing new off-the-plan apartment construction in Melbourne due to fears of oversupply.
Contrary to the popular cry of the media that there is an oversupply of apartments, I actually see a tremendous undersupply. Over 100,000 people migrated to Melbourne last year.
That figure is somewhere close to double the long-term average.
The Off the Plan Market in Melbourne is split into two distinct areas.
- CBD, Sth Bank, Docklands
Typically, high density, smaller apartments with higher risk of valuation issues come settlement, lower capital growth, higher rental yields, high percentage of off shore sales.
- Inner City Suburbs (2-20 kmsfrom CBD)
Low to med density, higher specs, usually larger apartments, higher percentage of local buyers (downsizers, local investors and FHB0), higher capital growth and steady rental yields.
Being an investor myself, the thought of paying stamp duty on something that doesn’t exist yet is ridiculous. However, it still makes good sense to invest in off the plan apartments given rents are strong and vacancy rates in suburbs are low.
We need sustainable buying conditions to ensure the market keeps moving forward and investors or the landlord generation keep buying. The demand on renting availability is evident when you witness lines at rental viewing in key areas such as South Yarra, Richmond, Hawthorn, Fitzroy, Carlton and Collingwood.
Affordability in Melbourne is an issue to a certain extent. Buyers want the postcode without the price tag hence apartment living is so crucial. In the same breath renting affordability is just as important as many prospective buyers don’t have sufficient deposit and/or not in a qualified position to buy.
This is a great situation for this new landlord generation who accumulate properties with the plan to enjoy the capital growth and increased rent over time. Many of these investors will rely heavily on their property portfolio as opposed to their superannuation as a way to live a great life past retirement.
Nic Cuni is Executive Director of Melbourne-based full service real estate company EST8 Agency