WEAKEST RENTAL CONDITIONS SKEWED TO CITIES
The nation’s weakest rental conditions remain skewed towards higher density markets, especially the cities of Melbourne and Sydney. In Melbourne, the downwards shift in unit rents has been more severe, with rents down -7.6% over the past 12 months.
However, rental rates in Melbourne’s apartment sector look to be stabilisng, with CoreLogic’s measure of rents holding steady over three of the past four months. The monthly trend in Sydney apartment rents has recently turned positive, with unit rents consistently rising over the past four months to be 2.8% higher over the year to date.
Finding vacancies more challenging outside capitals
Rental conditions have been stronger outside of Melbourne and Sydney, where demand is less dependent on overseas migration and interstate migration trends have provided an additional lift. Darwin and Perth have shown the most significant lift in rents. Rental supply has also been less substantial outside of Sydney and Melbourne due to historically lower levels of investment activity and less construction aimed at the investor segment of the market.
Extremely low vacancy rates plague 80% of Queensland
A Real Estate Institute of Queensland (REIQ) report has found that more than 70% of Queensland real estate agencies have rental property vacancy rates lower than 1%, whereas 3% is considered the norm.
In Brisbane, vacancies have been lower than half a percent for the past quarter, generating serious challenges for both tenants and property managers.
‘Record-low interest rates, government support and stimulus measures, and the pandemic-driven stampede we’ve witnessed migrating beyond our southern borders have sent Brisbane’s private rental market into uncharted territory, pushing vacancy rates down to their lowest levels since October 2012,’ REIQ chief executive Antonia Mercorella said.
Ms Mercorella called for the First Home Owner Grant to be made available to existing homes in order to solve Queensland’s rental crisis.
Berlin rent control study reveals ‘unintended consequences’
Economists at Munich’s Ifo Institute have conducted a study on the effects of using a rent cap to address rental affordability. However, the study revealed unintended consequences when landlords subject to rent caps sold their apartments, effectively freezing the supply of vacancies.
Economists have for years warned that any impact on the supply of rental accommodation leads to increasing rents. Clearly, when Berlin’s rental market was split in two, landlords who could no longer achieve a positive return bailed out, leaving the same number of tenants to compete for a smaller number of vacancies.
Despite countless studies documenting the adverse impacts of rent caps on the people they’re meant to protect; Governments seem continually drawn to experimenting with them as potential solutions to affordability. Regulatory changes limiting the rights of landlords in Australia make property investment less appealing than other asset classes, thereby contributing to ongoing issues of supply. One thing is certain; the private sector in Australia has a better record in the provision of housing than the government, which is the only alternative.
ARE TENANCY INSPECTIONS THE TIME FOR AN UPGRADE?
Some investment property owners think it’s enough to respond to the maintenance needs of their tenants, and not make any further investment in the property that may increase its value. Every property needs ongoing care, maintenance and upgrades, and the better condition a property is kept in, the longer it will retain its value for. Your regular tenancy inspection makes sure everything is in order, but it’s also a great opportunity to investigate in more detail the condition of your property, with the goal of making improvements – investing in your investment if you like.
Beyond the basic checks that are routinely done, it’s useful for your property manager to get specific when asking the tenant if everything’s working ok. Asking things such as how the gas heater has been running, whether the air conditioning seems to be working ok, if there are any issues with light switches or fixtures, leaking taps, strange noises when the toilet is flushed and so on are worthwhile. Often a small prompt can be a reminder about something that has only recently happened or worse – it’s been happening so long they now think of it as normal!
In addition to direct feedback, it can also be valuable to request photographs from your property manager of specific things - the carpet in a high traffic area for example (does it need replacing?), the progress of some gardening work or planting that was done some months before (is everything still alive?), or a more focussed look at wear and tear on walls and surfaces (do they need repainting?).
TOP 5 SECRETS OF TENANT RETENTION
It’s every landlord’s greatest wish to have good quality tenants in their property. While some don’t always see that dream fulfilled, others are reaping the rewards of great tenants and doing all they can to make sure they stay. So how do you keep a good tenant for the long haul?
Be responsive – whether responding to a maintenance call, approving a request or answering a question, follow through will work its charm every time. Arranging maintenance as quickly after it was reported as possible will definitely get you in their good books. It tells the tenant you heard them, empathise with them and respect their needs - action always pays dividends.
A wish list – It’s rare that tenants get the chance to have a say, so being asked ‘how would you make this property better?’, or “what’s your wish list for your home?’ is a real game changer. You may not action everything (or anything) on their wish list, but choosing requests that are easy to implement, not too costly and will add value to the property is really a no brainer.
Surprise upgrades – keeping tenants satisfied and happy can be as easy as a new shower head! If you’ve had some upgrades in mind for a while, surprise them with the news and brighten their day. New bathroom fixtures, replacement of some out-of-date tiles, or maybe some new additions to the garden all add value but also improve the tenants’ experience of living there (and thus wanting to stay on).
The little things - If you’re blessed to have responsible, committed tenants then sending a little gratitude their way in the form of a card in the mailbox here and there, a movie voucher or a small but strategically chosen gift is almost essential. It lets them know you value them and builds-in loyalty to you they may not have had before. At the very least, you could send a few sentences in a Christmas card telling them what great tenants they are and expressing your gratitude.
Be human – if a tenant feels like a place is home, they will take care of it as if it’s their own. If you take care of them, in recognition of this, everybody wins. Taking a human approach means being understanding when life gets in the
way. Their rent might be late here and there, or they might appreciate some notice if the rent is going to go up. Or worse – they might get sick, separate from their partner, or lose their job. Doing whatever you and your property manager can to be supportive and improve the tenants experience of the property is the key to a (hopefully) prolonged tenancy.