Your ‘actual’ return could be better than you think…
It is no secret that the rental market has softened over the past couple of years.
From an investor/owner’s perspective, this may appear to play out solely in terms of the amount of rent coming into their pockets being less than it used to be.
However, this is not the full story. In actual fact, it highly likely that there has been little or no change to their overall yield.
While rents have come off the boil, interest rates have also declined. Interest rates are often a neglected factor when it comes to tracking the performance of your investment.
From the middle of 2014 it was not uncommon to see standard variable investment property interest rates of around 5.9%, and currently, there are investment property interest rates available around 4%. This change in rates represents a reduction of around 30%. During the same period, rents in Perth have declined by around 22% (source: REIWA). Looking back as far as 2012, the variation is even greater.
Investors may be receiving less rent, but the reduction from interest outgoings certainly can’t be ignored.
Moreover, for investors that are not heavily geared, it is important to note that other types of investments – term deposits etc. – are also producing significantly less return than two years ago, confirming that property remains a strong investment vehicle when compared to other options.