PROPERTY investors in Mildura are fairing better than those in Victoria’s largest cities as profit margins tighten.
Rental property owners around Australia are spending more money on their properties than the properties are making, as bigger increases in expenses compared to income have established a “new normal”, says market research company Propertyology.
Head of research Simon Pressley said landlords had been the beneficiaries of fast-rising rents during recent years, but rising interest rates, higher mortgages and lower rental yields were leading to property investors in several areas experiencing increased expenses compared to income.
Property investors investing in Mildura, however, are on average fairing better, as the area has the lowest net loss of Victoria’s largest cities at -$7795 cash flow per year.
Melbourne was reported to have the worst in Victoria at -$25,836 cash flow per year.
Closest to Mildura was Latrobe (-$8875), Shepparton (-$9560), Albury (-$9834) and Ballarat (-$10,396).
Forty-two of Australia’s 50 largest cities had an annual net loss greater than that in Mildura.
Mr Pressley said of the 140 Australian townships with a population over 15,000, only Port Hedland, Karratha, Broome and Kalgoorlie were cash-flow positive.
“Unless one is using a large cash deposit, the new normal for a property investor entering the market today is a cash flow shortfall of $10,000 to $15,000 per year,” he said.
Mr Pressley said lower rental yields were a factor.
Mildura has been reported to have an appealing high rental yield due to its low vacancy rate of 0.6 per cent.
House prices in Mildura have also increased by 73 per cent, but the city still has one of the most affordable median house prices at $405,000.
Mildura’s average asking rent for a three-bedroom house increased $70 in the five years to July 2022. Melbourne’s increased by $50.
Mr Pressley said a “huge influx” of rental properties was the only thing that would get people out of makeshift accommodation and back into proper homes, to ease the pressure on the rental market.
He said tenants were experiencing rental pain and increased holding costs and an environment where all levels of government are unsupportive of property investors would only prolong the pain of increasing rents.
