After suffering at the hands of the Global Financial Crisis and the downward pressure felt across the board for the last two years, it now appears apparent that 2011 is shaping up to be a year that will show gains in both the commercial and residential leasing markets.
It is also fair to say that 2011 should see a reasonable recovery of returns for landlords across the board.
The two main factors for this are as follows:
1. The continued push from the resource sector ensuring more jobs will be created and their need to source employees from interstate and overseas. Companies are landing families and single workers straight into Perth with immediate requirements for accommodation. As these projects gather momentum, we are seeing increased demand from relocation agencies seeking corporate rentals.
2. The lack of any real development occurring since the global financial crisis has left a gulf of supply for land, house, apartment and commercial premises, as developers across the board ceased or scaled down operations, we are yet to see that impact upon the market.
As with many aspects of business, price is determined by supply and demand so, as we see the fundamentals increasing favourably for demand with a corresponding fall off in supply, then we can rightly assume the price will increase. An increase of 10 to 15 percent across the board for rental returns over the next 12 months is certainly not out of the question.
If we add this to the fact that the economy is improving and that the interest rate leaver will not be hit for quite some time, especially in light of the recent flooding and cyclone activity, then it would suggest that the rental push upwards should be with us for at least 2 to 3 years as it will take at least that long for developers to bring any significant quantity of finished product to the market.
The commercial sector will also experience favourable spin offs from the points raised but, in particular, in the resource sector, with its need to be accommodated in offices and warehouses and as vacancies dry up and with little replacement stock, we should see a similar outcome.
The serviced accommodation and hotel tourism market is also currently experiencing similar pressures from a rise in demand, yet dwindling supply, as some hotels/serviced apartments have actually been converted into residential apartments or offices and no new hotels have been built for the past 10 years.
Possibly, the lowest of all rental/leasing markets to recover would appear to be the retail sector. However, as we slowly return to better times and consumers increase their appetite to spend, then, so too, will opportunities to expand or to open new retail stores increase, all be it, at a slower rate.
The final and obvious fallout from a pending rental bubble will be the flow-on effect to prices. As returns to investors increase, more people will be enticed to purchase investment properties.
Therefore, 2011 should see a favourable return to better times for landlords in firstly rental returns but secondly regarding some price momentum.