Will rising rents draw more investors into Geelong market?

Will rising rents draw more investors into Geelong market?

THE impact of slower property investment activity in Geelong will be felt most by tenants in rising rents.

A new report into Geelong’s real estate market shows the weekly advertised rents for houses in the city rose 5.7 per cent in 2018.

The CoreLogic Regional Market Update showed rental yields held at 3.9 per cent as rents didn’t match rises in house prices.

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The median rental rate for houses hit $370 a week in Geelong, while the median house value rose 9.1 per cent to $581,000.

But McGrath, Geelong agent David Cortous said the investor market had been slow, driven by banks tightening the amount of lending for property investment.

The number of homes sold in 2018 also fell 13 per cent on the previous year, the report showed.

He said falling investment activity had increased competition for fewer rental properties.

“What that’s done is driven rental demand here in Geelong — the rental market has never been hotter,” he said.

“The market may have cooled a little bit on the sales side, the rental market is the hottest I’ve seen in the Geelong market.

“For investors the returns for a rental property is the best it’s been in years,” he said.

“You’re going to see rents rise over the next 18 months.”

CoreLogic analyst Cameron Kusher said rental yields in Geelong were eroded as house prices climbed, but remained stronger than in Melbourne.

“We have seen some decent rental growth over the past 12 months but we know there is more supply coming on line as well,” he said.

“From a rental yield perspective it stacks up much better than Melbourne does at this point in time.”

Mr Cortous said rent rises would be worse if a Labor government was elected and changes to negative gearing and capital gains tax discounts were enacted.

“If a Labor government gets in it will drive that even further, drive rentals higher,” he said. “It’s going to be a lot harder on renters.”

Labor’s policy would axe negative gearing on all but new homes built for investment purposes and halve the capital gains discount on sale profits to 25 per cent.

But the laws would be grandfathered, meaning investors could continue to claim benefits from negative gearing on existing dwellings and homes purchased before the laws were enacted and would be entitled to claim the full 50 per cent capital gains tax discount on profits when they sold later.

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