The rooming house landscape across both metropolitan and regional Victoria is a competitive one for both investors and tenants, and in this article we wanted to delve deeper and investigate why this is.

What do Rooming Houses offer today?

Since the early 2000s, a model of profitable private rooming houses has emerged to challenge the often more expensive residential rental market and offer an alternative for investors tired of purchasing negatively geared property.

How many Rooming Houses do we have in Victoria?

In 2020 the state recorded more than 1400 rooming house locations registered with Consumer Affairs which might sound like a lot, but is it really?

According to the 2016 Census this figure makes up only 0.05% of all homes, so it is safe to say owning one would certainly put you in a very exclusive group of investors.

Why invest in Rooming Houses vs other residential dwellings?

The biggest stand-out benefit to investing in a rooming house development is the high rental yield and securing a cash-flow positive property practically from day one.

The high rental return and associated operational requirements are the main reasons why this investment works very differently to a standard residential apartment or a house.

Owners like that if one tenant moves out, they still have four or more residents paying rent to ensure their investment costs continue to be covered.

Also, while a rooming house will cost a little bit more than a standard house in its respective suburb, they are substantially cheaper than purchasing eight or nine apartments to achieve an equivalent rental return.

What is the demand for tenancy?

According to the latest census data, 2.3 million Australians are living in a single-person household – that is 1 in every 4 people.

The problem is only 5% of dwellings in this country have 1 bedroom only – so many are forced to share accommodation with others or stay at home with mum and dad to save money.

Rooming houses satisfy this segment of the market by providing a secure and private single person dwelling – often with a private bathroom and important shared facilities for a more affordable rate.

Achieving independence is a significant milestone for the younger generation today, especially as over 50% of 18 to 29 year olds are still living at home.

A rooming house will typically be cheaper to rent then a standard one-bedroom house/apartment but still provides the freedom they desire.

Now let’s look at the numbers in Victoria

In 2016 there were 521,828 people living in single person households.

However, there were only 107,356 one-bedroom dwellings recorded in the census.

These figures already give you an indication of the supply demand challenge.

Here are some rental figures we have pulled from some of the most popular suburbs across Melbourne.

The average rental return for a one-bedroom residence as of 20 September 2020 – this is while Victoria is in stage 4 lockdown so we can expect a slight increase to these numbers.

Fitzroy – $430pw

Melbourne CBD – $400pw

Richmond – $400pw

South Yarra – $390pw

Rooming House – $200pw to $300pw

Location and whether the rooming house property is self-contained or provides shared facilities impacts the rental amount and these rental agreements often include all utilities.

A rooming house investment will typically return between $2000pw and $2500pw in rent depending on the location and number of bedrooms. In a recent survey we conducted the average number of bedrooms in a rooming house was 8.

(Source: ABS Statistics)

Conclusion and how to get started

There is no doubt demand for single occupancy living is high and will continue to be strong long into the future. Having to pay more to live in a larger property with 2-3 bedrooms and sharing is certainly not a long-term ambition for many.

It only takes a couple of quick searches on popular websites like Gumtree and Flatmates to determine the rental market is competitive, costly and lacking single occupancy opportunities.

If you want to discuss your property investment strategy in more detail and determine if a rooming house development should be on your radar, please do not hesitate to get in touch with The Hopkins Group

Our industry leading rooming house management service is led by a team of expert property professionals, who take great pride in maintaining high service standards and achieving outstanding results for clients.

If you have any questions whatsoever regarding rooming houses you can contact our office on 1300 726 082 or email info@thehopkinsgroup.com.au.

In Melbourne, 124 homes were scheduled for auction this week, down from 223 over the previous week and 545 this time last year.

With stage 4 restrictions in place until 14 September, open homes, private inspections and on-site auctions have ceased.

This has had a major impact on the number of auctions scheduled across Melbourne as the city continues to experience a decrease in sales throughout the lockdown period.

We expect this downward trend to continue for the next 3-4 weeks while buyers are limited to either making an offer sight unseen or via an online auction.

Interestingly the property withdrawal rate has been much lower relative to the previous lockdown period in April and early May this year.

The preliminary data collected indicates 31% of Melbourne auctions were withdrawn from the market this week, compared with a peak of 65% through the second week of April.

Of the 64 Melbourne auction results collected so far, 60.2% were successful, although this will be revised lower as the remaining auction results are collected.

Last week saw a final clearance rate of 60.8% recorded across the city, while this time last year, 69.3% of Melbourne auctions were successful.

Realestate.com.au reported that there were also 883 private sales in Melbourne this week, significantly fewer than the number sold last week (1,254) and the 1,262 properties sold by private treaty the week before.

What does the future hold?

It’s the silver lining to the COVID-19 recession for those fortunate enough to still have a job, who already own a home or are looking to purchase in the coming months.

Low interest rates are here to stay for the next 2-3 years based on reports from the RBA Governor Philip Lowe, leading economists and comments from Prime Minister Scott Morrison.

We also expect to see some great opportunities for investors and first home buyers ready to take advantage of prices either falling or remaining stagnant across the state.

Access to the new HomeBuilder grant is projected to stimulate the market with $25,000 available to anyone securing a house and land package or substantially renovating their existing home.

If you would like to confirm if you are eligible for any government grants please speak with a representative from The Hopkins Group.

Downward pressure on Melbourne rents

Asking rents in Melbourne have continued to soften, even though there’s been no further apparent increase in the vacancy rates this month.

Inner suburbs like Melbourne CBD, Southbank and Docklands have experienced some of the biggest falls in rent this quarter.

We think this is due to the increase in rental supply now owners are forced to search for tenants in the absence of overseas travellers.

Our property management team are stressing to clients the importance of caring for and maintaining your investment portfolio during this time as tenants won’t have to look far for a comfortable and affordable home.

The availability of online 3D tours is also proving to be a valuable asset for owners during these periods of isolation and social distancing.

Click this link to view a 3D property tour we recently shot for one of our clients in Ascot Vale.

This technology allows the user to view every corner of the property online from the comfort of their own home.

Why property investors shouldn’t be deterred from investing in Melbourne

Before coronavirus hit our markets, Melbourne property prices were surging with dwelling values up 12% on the previous year.

However, housing values in Melbourne moved through the fourth month of decline, racking up a cumulative 3.5% decline between the recent March peak and the end of July.

We believe this small and steady fall is no need for alarm as COVID-19 restrictions were almost certain to halt the markets progress.

The city’s housing market conditions have been weaker than Sydney and Brisbane, which we attribute to the states extended period in isolation.

Our lack of exposure to overseas migration and foreign students as a source of demand has also had a significant impact on recent figures.

Despite these weak conditions, buyer activity has improved over the past three months, after-sales fell by around 41% in April.

If Melbourne emerges from lockdown in 3-4 weeks’ time and cases continue to fall to similar levels in NSW, we expect a dramatic increase in activity and a similar resurgence to Sydney’s housing market.

Let’s talk property investment

So how is your property portfolio performing?

What are your short and long-term property investment goals?

Will your direction enable you to achieve the financial success and choices you’re looking for?

How are you assessing your investments’ performance?

The Hopkins Group property investment advisory team would love to help you answer these questions in an obligation free video meeting or phone call.

Melbourne’s population was forecast to increase by around 10% in the next 4 years and will remain one of the most liveable cities in the world when we get through to the other side of this pandemic.

If you’d like to talk about your circumstances and how we can help you discover sound investment properties across Melbourne please contact The Hopkins Group on 1300 726 082 or email info@thehopkinsgroup.com.au.