08 Feb Melbourne yields are up – Cate Bakos
Rental yields are on the improve especially in Melbourne. Cate Bakos says the competition for rental properties is really heating up.
Kevin: There have been some mixed stories about the Melbourne market in recent times, but some good news emerging. Cate Bakos from Cate Bakos Buyer’s Agent in Melbourne, CateBakos.com.au, joins me.
Good morning, Cate.
Cate: Good morning, Kevin. How are you going?
Kevin: Good. Happy New Year to you, too. First time we’ve spoken in 2018.
Cate: It is.
Kevin: Cate, tell me about rental yields. They look to be increasing in the eastern major cities, anyway, particularly in Melbourne.
Cate: Yes, that’s right. We’ve had particularly low rental yields in Melbourne. Always, Melbourne is the lowest capital city for rental yields. But we haven’t seen a lot of rental growth of late, either. We’ve had a really strong growth market, and I guess the down side of something like that is rental yields can drop.
For the first time in quite a while, we’ve seen an increase in our rents, and it’s been across the board but we’ve particularly noticed it in the inner ring, as well. We’re even seeing large numbers of tenants attending open for inspections and sometimes pushing the rents above the asking range. So, it has been quite noticeable.
I’d put it down to a combination of things, largely APRA’s interventions in investment lending and a slowdown of investors in the market, and also the tightening on bank servicing, which has precluded home ownership for some people who were only just able to secure a home before the measures got a little bit tougher.
Kevin: Do you think, too, Cate, it reflects a change in lifestyle for us or an acceptance of a change in lifestyle that we’re finding units much more desirable?
Cate: Not necessarily. I think Melbourne is one city, as an example, that has always had an acceptance of people being prepared to rent in areas where they choose to live. And not just the rentvesting model; we also have tenants out there who might be professional tenants who have a portfolio of shares or other investments.
Kevin: There is a wide range of tenants in Melbourne, aren’t there? Very transient?
Cate: Yes, we do. We have people on contracts. We have professional tenants who may not necessarily wish to lock themselves into a particular area. We have a pretty broad array of tenants, and so it’s always been quite accepted that we have professional tenants out there and investors have to cater for them.
Kevin: We’ve also heard a lot of talk over the last 18 months, particularly over the last 6 months, I guess, about an over-supply of apartments in Melbourne. But that’s certainly not being reflected in growth, is it?
Cate: We’ve had some really good growth data for apartments. I was really impressed when I was reading through the growth data in most recent CoreLogic quarterly report to see that what feels apparent out there is actually reflected in the data. So, in the final half of last year, we certainly saw a change in sentiment around particularly boutique gated apartments in great locations.
While there has been talk of an over-supply in the inner city, we certainly have a lot of areas that offer apartments, and particularly, really nicely located boutique ones. They have been going really well. They’ve been performing strongly, and we’ve had the first-home buyers largely pushing those, as well.
Kevin: This raises a great point, and we’ve spoken many times about how diversified the market is in different parts around Australia. We’re now seeing this diversification emerge in the style of property, as well. You just can’t have a statement that says there’s an over-supply of units in Melbourne when you look at the different styles of units, which is really what you’re highlighting there, Cate.
Cate: Absolutely. Units doesn’t just reflect apartments. Units generally reflect something that has been subdivided. So, we have townhouses and villa units in that mix as well. The data integrity is only as good as what’s reported, but we can’t assume that unit just means brand-new, one-bedroom, high-rise apartments; it actually spans a lot of dwellings. And a lot of those dwellings are deemed super-desirable by tenants and by owner-occupiers. Of course, it’s sentiment that drives growth, so we have to take that into account.
Kevin: Great talking to you, Cate Bakos, buyer’s agent out of Melbourne, CateBakos.com.au.
Thanks for your time, Cate.
Cate: Lovely to chat with you, Kevin.