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September 2022 Landlord Update
over 2 years ago
September 2022 Landlord Update
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TENANTS MORE WILLING TO RENT APARTMENTS


Rental prices increased a further 0.8% in August across CoreLogic’s national rental index, easing after the monthly trend peaked in May when rents rose by 1.0%.

The slowdown in rental appreciation comes after annual rental growth reached double digits (10.0%) for the first time since at least 2006, when CoreLogic rental statistics commence.

The slowdown was most evident across regional Australia, where the annual rate of rental growth eased from 12.5% in November last year to 10.1% over the 12 months ending August. Growth in capital city rental trends looks to be easing a little as well, with the combined capitals recording a 10.0% rent rise over the past year, while the monthly trend eases from a recent peak of 1.1% in May to 1.0% in August.

Increase in asking prices slows most with freestanding rental homes

The slowdown in rental growth is more apparent in the detached housing sector, where renting tends to be more expensive. House rents across the combined capitals have increased at more than double the pace of unit rents over the past five years, rising 21.8% and 10.8% respectively.

“This trend is reversing as tenants become more willing to rent in higher density situations, especially in Sydney and Melbourne where unit rents are now rising at a much faster pace than house rents,” CoreLogic’s research Director, Mr. Lawless said.

“Potentially we are seeing the first signs of smaller rental households that formed earlier in the pandemic reverting back to larger households or utilising higher density rental options to combat worsening rental affordability.”

National housing completions are also likely trending higher in 2022, particularly in the detached house segment, as an inflated number of builds slowly work through the construction pipeline. Mr. Lawless said the trend may relieve some pressure on rental demand, as some tenants move out of rentals into their new homes.

However, as overseas migration normalises, it is likely rental demand will increase further. Without any signs of a material rise in rental supply, the outlook for rents remains one of further growth.

With rents consistently rising while housing values broadly trend lower, gross rental yields are firmly in recovery mode. After capital city gross dwelling yields bottomed out at the record low of 2.96% in February this year, yields have consistently risen to reach 3.29% in August.

While capital city yields are still well below the pre-COVID decade average (4.0%), considering the outlook for lower housing values and higher rents, we could see rental yields returning to around average levels over the next year.

Outlook remains one of uncertainty

The outlook for the housing market remains intertwined with the trajectory of interest rates. Forecasts for the terminal cash rate generally range from the mid-2% to the mid-3% range, although financial markets are pricing in a peak cash rate of just over 4% by August next year.

However, mortgage costs and rents are rising, and household budgets are stretched. The portion of annual household income required to service a new mortgage nationally increased to 44.0% in June, up from 40.4% over the March 2022 quarter, likely offsetting some of the improvements in other measures of housing affordability.

WHY LANDLORD’S INSURANCE IS A MUST HAVE

Many landlords overlook the need for insurance for their rental however the benefits far outweigh the costs and like any insurance, it’s not until something goes wrong that you realise you need it (or needed it). There are a few key components to a reliable landlord’s insurance policy so it’s important to shop around and make sure you the policy you get covers the basics you need.

The 3 main considerations are price, understanding what is covered and what isn’t (inclusions and exclusions), and what their claims process looks like. There are also different kind of insurance depending on the type of property you have. A property on a strata title needs a different approach to a stand-alone property as there is usually more common property involved and shared facilities such as pools, gyms and walkways need coverage. A property that is furnished or has had significant investment in gardening or landscaping may also need contents insurance with specific questions asked around damage or loss to property such as furniture or plants. There are also the big-ticket items like fires, floods, or an accident that impacts the tenant. A personal liability claim because your tenant tripped on a paver and suffered a nasty injury can be disastrous to everyone involved with good insurance your only saving grace.

It’s a good idea to talk to your property manager for some recommendations or ask someone you trust who their policy is. Researching to find a policy you like is important but there’s not better solution than first-hand experience.     


THE ESSENTIALS ON RENT, BOND & UTILITIES FOR LANDLORDS


When becoming a landlord for the first time, it can feel like you must know so many things. However, there are three essential subjects that matter more than everything else and these are at the heart of any rental agreement.

Securing rental payments

There are some basic rules around choosing your tenant – ideally you want someone who can pay the rent and do so consistently throughout their tenancy. However, it’s also crucial to understand your obligations under the Equal Opportunity Act. You can’t discriminate against an applicant because of age, disability, gender, marital status, mental illness, parenting status, pregnancy, race, religion, sexuality and more.

Once you’ve chosen the right tenant you can then decide how frequently you want them to pay rent. This frequency is important is it should align with the tenant you choose and their capacity to meet those payment deadlines.

A property manager is a great asset when it comes to choosing and managing tenants. They have the expertise to spot potential issues and will also do the dirty work for you if your tenant doesn’t pay their rent as agreed. Tenants who are more than 14 days late with their rent are considered in arrears and the landlord can choose to issue them with a notice to vacate.

Covering late or unpaid rent is one of the pitfalls of being a landlord however a good property manager should work to prevent this from happening wherever possible. 

Why you need a Bond

There is no end to the ways tenants can ruin your property – either by accident or intent.

A bond is paid at the commencement of the tenancy and acts as a kind of insurance policy so that if something is damaged there is some cash available 

to cover the cost of repair when the tenant moves out. It is usually the same amount as the first month’s rent and is held in in trust by the state until the tenancy ends. 

Some of the reasons a landlord can claim a portion, or all of the bond include unpaid rent, damage to the property that requires cleaning or repair, bills left unsettled by the tenant that need to be finalised and loss or theft of property.

Improvements to the property to address wear and tear cannot be claimed on the bond, however damage that both the tenant and landlord agree on (or is easily identified in the condition report) can be claimed out of the bond. 

Utilities

Responsibility for utilities will differ from property to proper and from state to state.

Tenants are generally responsible for most utilities – electricity, gas, internet, phone, and water however in some cases, such as apartment buildings a water bill may be the landlord’s responsibility depending on how the property is metered.

It is also the tenant’s responsibility to connect these and cover any costs associated with their connection when they move in and similarly to disconnect when they move out.