When it comes to investment in the property market, many investors believe timing in the market is not as important as time in the market.
While this is likely to hold true, if we are able to pick the right timing our returns are possibly going to be enhanced.
So when could be a good time to invest in the market?
Many would say the ideal time is when capital values and rents are forecast to increase and vacancy rates are predicted to fall.
We’ve looked at property value expectations in an earlier article and noted the positive sentiments of many commentators.
So are we also seeing positive sentiments in regards to rents and vacancy rates as well?
January this year saw a decrease in vacancy rates with the national residential rental vacancy rate falling to stand at 2.0%, being a return to pre-pandemic vacancy rates1.
While on a national basis the vacancy rates appear favourable, the same story cannot be told for all capital cities and locations.
Melbourne continues to record the highest vacancy rate in January of 4.4% significantly above the prior year rate of 2.1%1.
Similarly, while vacancy rates fell across Sydney, vacancy rates in the CBD still remain high at 6.2%, however significantly less than the high of 16% in May 20201.
While vacancy rates in some locations remain high, generally these markets are experiencing a downward trend.
Market asking rental
Rental values also appear to be moving favourably with rents increasing by 3.2% for the year to February 20212.
However, a large proportion of this increase is attributed to regional areas that experienced an annual increase of 7.3%. All areas of Australia experienced increases other than Melbourne (-2.8%) and Sydney (-0.5%).
Digging deeper though, all the declines were recorded in the asking rents of units only, being Melbourne (-8.0%) and Sydney (-5.3%) with all other property types and locations experiencing increases.
Does that mean the timing is now?
These market conditions could explain what has actually happened in the market place with new loan commitments in value (seasonally adjusted) for investment purposes experiencing a significant increase.
While there was a 25.2% decline in new loan commitments for investment following the onset of the pandemic, by November 2020 these commitments had recovered to prepandemic levels and have now increased significantly, being 21% above pre-pandemic levels.
Do your research
While capital values, rents and vacancy rates have generally experienced favourable movements across Australia in recent months, a number of markets have experienced very different trends. Accordingly when investing you will need to research the specific location and property type to ensure that you are making an informed decision.