Predicted rental increases, local housing shortages and strong capital gains are set to create a favourable environment for investors seeking to re-establish themselves in a market that has been dominated by first-home buyers in recent years.

Many commentators are heralding 2010 as “The Year of the Investor” with established borrowers re-entering a bullish market encouraged by a decrease in competition. According to the recently released BIS Shrapnell Long Term Forecast, investors have every right to be confident with dwelling investment being one of two key factors that are set to drive the recovery of the economy in the near term.

Another positive for investors was the phasing out of the Government’s First Home Buyers Boost late last year which has prompted many potential first time property owners to stay in the rental market – further driving up demand. Short supply means rising rents, according to Australian Property Monitors Economist Matthew Bell, “On the supply side of things, there simply aren’t enough new properties being built for investment purposes to meet this increased demand. Increased costs for landlords in the form of rising interest rates and rising land taxes due to increasing land values, should mean that asking rents will start to increase steadily throughout 2010.”

What it means for the Perth market

According to APM’s Rental Market Report, Perth property investors could be in for a win with median house rents tipped to rise from $360 to $400 per week – an increase of 11%. “An improving employment outlook means, overall, renters will be more willing and able to afford rental increases,” Economist Matthew Bell said. “Both Brisbane and Perth are poised to outperform the rest of the country as their property markets play catch up to Sydney and Melbourne.”

The Perth market in particular is set to go from strength to strength this year on the back of the current mining and energy boom. We’ve seen in the past that a strong resources sector tends to be positive for the state’s property market and with over $270 billion worth of projects earmarked to begin in 2010 real estate in the metro area is proving to be an attractive investment prospect for local and international investors.

What are your thoughts? Will 2010 be “The Year of the Investor”?