For investors looking for strong rental returns in 2013, Perth and Darwin are the markets to be in, if recent performance is anything to go by.
Both cities – beneficiaries of the mining investment influence – recorded double-digit rental growth over the year to September, while rents hardly moved in the other capital cities and went backwards in Hobart and Adelaide, according to the latest Market Facts update from the Real Estate Institute of Australia (REIA).
The top-performing rental market over the year to September has been Perth three-bedroom houses, with rents rising 15.4% annually to a median of $450 per week.
This growth was almost matched by Perth two-bedroom units, where rents increased by 14.9% to $425 per week.
Not far behind was Darwin’s two-bedroom unit market, with rents rising 13.5% to a median of $463 per week, making the Northern Territory capital city the most expensive unit market in Australia – just ahead of Sydney, where two-bedroom units rent for $460 per week.
Darwin also registered near double-digit growth (9.5%) in three-bedroom house rents to a median $597 per week – the most expensive capital city to rent a three-bedroom house, far ahead of second-placed Canberra ($460).Click to enlarge
Weekly rents for three bedroom Sydney houses have risen 5% over the past year while Sydney unit rents are up a modest 2.2%.
Melbourne rents hardly moved, while Brisbane registered 2.9% annual gains for both houses and units.
In last week’s Property Observer webinar looking at investor opportunities in 2013, hotspotting.com.au’s Terry Ryder tipped Perth and Darwin to be the standout capital city markets next year having led the recovery in 2012.
Ryder is tipping annual capital growth in excess of 10% in Perth and Darwin in 2013.
He notes that apart from strong house price, Darwin has recorded an “outstanding” 28% rise in building approvals for the year to September (compared with a 9% national decline)
“Every other state and territory has shown a decline in building approvals,” he says.
In addition, Darwin has recorded 17% growth in loans to owner-occupiers (second best nationally) and 22% growth in loans to property investors (the highest growth nationally).
Darwin, Ryder says, is being boosted by its evolution as a liquefied natural gas (LNG) hub with the $34 billion Inpex gas project now under construction as well as being a military hub with a growing influx of US military personnel.
Ryder suggests investors focus on Palmerston City, which is the satellite city to the south of Darwin and the most affordable market relative to the very unaffordable main Darwin market.
On Perth, Ryder says the market is finally showing signs of strong growth having last peaked back in 2007 and has been going backwards since then.
“There has been huge rental growth, but not much price growth, which is just starting to come through now.
“2013 is the year of price growth for Perth,” he says, with the city underpinned by having the best economic indicators in Australia.
Ryder hotspot picks in Perth are the Midland precinct to the north, Murdoch to the south and Rockingham – a very affordable coastal enclave to the south.
For more on Terry Ryder’s investment outlook for 2013 and where to consider investing view the full webinar: Regions versus capital cities - where to invest in 2013?