According to recent data, residential property investors are more active than they have been for quite some time as gross rental yields in most state capitals are around 5 per cent.
This, of course is against a background of almost full employment and a worsening shortage of rental accommodation.
Gross rental yields are a most important factor for investors as it is obvious; there is more desirability in the asset class when investors can see that they are getting a solid rolling return.
For would-be home owners, high rents mean the gap between paying rent and servicing a mortgage narrows and encourages them to make the jump into home ownership. Either way, high rents facilitates value growth.
Landlords are rubbing their hands together, over the last five years results, according to SQM research, rental values, in both Sydney and Melbourne for example, have climbed at a compound rate of 5 to 8.5 per cent per annum, clearly exacerbated by vacancy rates below 1.5%.
Owners of commercial property would give their back teeth for such increases. No wonder interest in the property sector from investors is building.
So, you would think that with rising rents and low mortgage rates, first-home buyers would be more active. However, given the mixed messages in the market, more and more potential buyers are waiting on the sidelines.
Presumably they are still nervous about interest rate rises or perhaps even living in false hope of massive price falls.
I say false hope, because in the meantime, this environment creates an intensified demand for rental dwellings and in doing so, further strengthens the negotiation platform for landlords.
This tough rental market is just about to get tougher with opportunities for investors to cash in.