What Australia’s Per-Capita Recession Means For Property Investors

 

Australia just entered a per-capita recession. A per-capita recession occurs when the rate that the economy is growing is less than the rate the broader population is growing. If you think of the Australian economy as one giant pie, the pie still got bigger, but it was divided into more slices and so everyone’s slice was a little smaller than the year before. In other words, living standards have gone backwards.

The real issue has been the lack of wage growth in the last ten years. With smaller wage increases and tighter lending criteria from banks, it is not unreasonable to expect that the property market will continue to be sluggish. The risk that the economy remains sluggish has significant impacts for landlords. Consider this, renters experience low wage growth and higher cost pressures may find themselves more likely to fall into rent arrears, and less willing to accept annual rent increases. Untenanted properties may find themselves vacant for longer, whilst the prospect of potential rate cuts makes owning a property more appealing relative to renting.

The upshot of all these factors are potentially lower yields for landlords. Clients of Certainty Property experience no arrears, no vacancies and are not exposed to falling rents as we pay an agreed rent. In the event that a property is untenanted, or the tenant is in arrears, we will continue to pay the rent. This is how property management should be.

If you’re interested in discussing how Certainty Property can assist you, please give us a call on 1300 577 298, or send an email to simon@certaintyproperty.com.au