RATE OF GROWTH IN RENTS EASES, VACANCIES STUBBORNLY LOW
The monthly pace of rental growth picked up a little in January, with national rents up 0.7% compared with a 0.6% rise in December, but still well below the peak monthly rental growth rate from May 2022 (1.0%), according to CoreLogic.
The rise in the pace of rental growth was centered in the capital city markets, where monthly rental growth lifted from 0.6% in December to 0.8% in January. Growth in rents across the combined rest-of-state areas reduced from 0.6% in December to 0.4% in January.
Over the rolling quarter, national rents rose 2.1% which was higher than Q4 last year (2.0%) but down from a recent high of 3.2% over the three months ending March 2021.
After recording substantially larger increases through the worst of the pandemic, the rate of growth in house rents is generally easing in most regions, reflecting a transition of demand towards more affordable, higher density types of rental stock.
In contrast, unit rents have seen a surge in rental growth over the past year. This can be attributed to a combination of affordability pressures driving more rental demand towards cheaper rental options, and a possible reversal in rental preferences as tenants once again seek out housing options closer to centres of amenity such as the CBD and transport hubs.
It’s likely a resurgence in overseas student numbers will add to rental demand over the coming months, especially in light of the recent policy announcement in China where academic degrees and diplomas awarded from online studies will no longer be recognised.
With overseas student numbers surging, it is likely inner-city rental precincts and suburbs close to universities, especially those in Melbourne and Sydney, will see a further tightening in vacancy rates and upwards pressure on rents. Inner Melbourne rents are up almost 30% over the past 12 months and inner Sydney rents are more than 20% higher than this time last year.
Gross rental yields have continued to trend higher, rising from an historic low of just 3.21% in February 2022 to 3.85% in January 2023. The 64-basis point recovery over the past 11 months, has seen gross yields rise above the levels recorded at the onset of COVID in March 2020 (3.76%).
Market downturn shows signs of easing
The national Home Value Index (HVI) fell a further -1.0% in January, which was a slight improvement on the -1.1% decline recorded in December, and the smallest month-on-month decline since June last year.
The reduction in the rate of decline was evident across most capital cities, except for Adelaide (-0.8%) and Perth (-0.3%) where housing values have held firmer since interest rates began rising in May.
Every capital city posted a decline in dwelling values through the month, led by Hobart (-1.7%) and Brisbane (-1.4%), while the smallest drops were recorded in Perth (-0.3%) and Darwin (-0.1%).
Sydney’s median dwelling value dropped below $1 million for the first time since March 2021, falling -1.2% in January, an improvement on December’s -1.4% decline.
TIPS FOR SETTING A REALISTIC RENTAL PRICE
Setting your rental price is an important aspect of managing a rental property. It affects your income and ability to attract tenants. Here are some tips to help you understand how a First National property manager will determine a price for your property:
1. Research the market: Before setting a rental price, we research the current rental market in your area. We look at comparable properties, their location, size, and features. This enables us to recommend a price that is competitive and in line with market conditions.
2. Consider your target market: We think about the type of tenant you want to attract, and what they are looking for in a rental property. The we write an advertisement targeting that audience's interests.
3. Offer incentives: We may recommend offering incentives to attract tenants to your property, such as flexible lease terms, being pet friendly, or perhaps regular garden or pool maintenance. This can help you attract more potential tenants and increase the demand for your property.
4. Be flexible: We recommend you be open to negotiating rental prices with potential tenants. If you are flexible and willing to work with your tenants, you may be able to find a rental price that works for both parties.
EFFECTIVE COMMUNICATION & RESOLVING DISPUTES
Effective communication is key to a successful landlord/property manager/tenant relationship. Good communication helps prevent misunderstandings, reduces the risk of disputes, and enables both parties to find mutually acceptable solutions to any issues that arise.
This month, we look at several techniques for effective communication and dispute resolution between landlords and tenants that First National property managers use.
Establish clear expectations and communication channels
It is important to set clear expectations from the outset of any tenancy, including the preferred method of communication between the property manager and tenant. This could be in the form of regular in-person meetings, email, phone calls, or text messages. The more clearly these expectations are defined, the less room there is for misunderstandings and miscommunications.
Listen actively and respond appropriately
Effective communication also requires active listening. This means taking the time to truly understand the tenant's perspective, rather than simply hearing the words being spoken. It also means responding in a manner that is appropriate to the situation and that takes into account the tenant's needs and concerns. For example, if a tenant is complaining about a noisy neighbour, the property manager and landlord should take the time to understand the nature of the issue, and then take steps to resolve it in a way that is satisfactory to the tenant.
Use clear, concise language
When communicating with tenants, it is important to use clear, concise language. We avoid using technical jargon or legal terms that may be confusing. Instead, we explain things in a straightforward manner, using
simple terms and examples to help the tenant understand. This helps to prevent misunderstandings.
Be respectful and non-confrontational
In any dispute, it is important to remain respectful and non-confrontational. First National's property managers are trained in how to manage difficult conversations, which includes not responding to any personal attacks that may come from a tenant and focusing on the issues at hand. By staying calm and professional, property managers can help to defuse potentially explosive situations, and maintain a positive relationship with the tenant.
Be empathetic
Being empathetic is another important component of effective communication. For example, if a tenant is having financial difficulties and is unable to pay rent on time, a property manager who is empathetic will take the time to understand the tenant's situation and try to find a solution that works for both landlord and tenant.
Document everything
Finally, it is important to document all communications and disputes with tenants. This includes written records of any phone calls, emails, or in-person meetings, as well as any agreements or solutions that are reached. Keeping a clear record of communications and disputes can help to prevent misunderstandings, and provides evidence in the event of any legal disputes.
Wrapping up
You might choose to manage your own rental property but it’s critical that you stay on top of changing legislation and safety compliance requirements. First National Real Estate’s Investor Relations Managers are highly trained individuals who understand all the requirements for property management. They are expert at conflict resolution and ready to solve all your pain points.
Ask for an appraisal and we’ll show you how we can make rental property ownership the rewarding journey you anticipated.