Have you ever wondered whether living in a neighbourhood with a high number of renters lowers your home’s potential for capital growth? If you have, then you are not alone as this is a common question asked to REIV members from concerned home owners. REIV research of this relationship shows that this is not necessarily the case and could actually be the opposite.

Having a higher number of renters in your neighbourhood may even improve your home’s potential for capital growth as it becomes a more appealing area for investors, not just owner-occupiers.

In suburbs where less than 40 per cent of households were renting, the median house price grew by 67 per cent over the past ten years. In suburbs where over 40 per cent of households were renting, the median house price grew by 81 per cent over the past ten years.

Take for example the suburb of Footscray. According to the 2011 Census, Footscray had a high share of renters with 54 per cent of households renting. The median house price in Footscray increased by 93 per cent from $295,500 in June quarter 2003 to $553,000 in June quarter 2013.

Berwick, on the other hand, had a lower share of renters comprising 19 per cent of households in 2011. Over the past ten years, the median house price in Berwick increased at a slower rate of 55 per cent from $272,500 in June quarter 2003 to $443,250 in June quarter 2013.

The impact on unit price growth is not as clear. It is also worth noting that there are also, of course, some exceptions where house price growth has been substantial even though the share of rental households is relatively low. This serves as a reminder that there are a myriad of factors that could impact on your home’s potential for capital growth but having a high number of renters in your neighbourhood is not likely to have a negative impact on this.

Courtesy of REIV.com.au

Do renters impact on your home's price growth?