Investors Should Consider Vacancy Rates When Buying A Property In addition to selecting a location with high capital growth, one of the other key factors in deciding whether to purchase an investment property is to determine rental vacancy rate trends in the local area.

With a new financial year approaching, many hundreds of people will be considering buying an investment property.

One of the most significant trends in the property market in recent years has been falling gross rental yields for Perth investors as rental income growth has not matched the capital growth of properties. The latest REIWA figures show that gross rental yields are now just 3.8%. If an investor finds a property with the potential for high capital growth, they should then consider the issue of local vacancy rates because this will help determine the rental returns of the property which are critical in allowing the investor to hold the property over the longer term.

The rental vacancy rate is the percentage of rental properties in a given area that a currently available for rent. “This rental vacancy rate is very important in determining rental growth rates. For example, a rental vacancy rate above 3.0% means that rents tend to stagnate while a rental vacancy rate below 3.0% enables landlords to raise rents.

At the end of 2004, the rental vacancy rate in Perth fell by 1.1% over the year to 2.7%. While is it much easier to find a tenant compared to a year ago, the market realty is that properties in areas with below average vacancy rates have a much higher capacity to achieve higher rental growth rates because of the supply and demand factor.

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