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April 2023 Landlord Update
almost 2 years ago
April 2023 Landlord Update
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RENTS ACCELERATE ACROSS UNIT SECTOR AS MIGRATION SURGES


According to CoreLogic, rental markets are becoming increasingly diverse but vacancy rates across most regions remain extremely tight. The general trend across the largest capitals is towards an acceleration in rental growth, especially across the unit sector, but slowing growth across the smaller capitals, particularly for houses.

In Sydney, the annual pace of growth across the unit sector (18.1%) is now almost double the annual growth being recorded for houses (9.4%). A similar trend can be seen across each of the capital cities, where unit rents are rising at a materially faster pace than house rents. The quarterly rise in unit rents over the March quarter was at a record high across Sydney (5.3%) and Melbourne (4.3%).

“There is likely to be two factors at play here. With growth in house rents previously much stronger through the worst of the pandemic, it’s likely more and more tenants have no choice but to seek out more affordable options in the medium to high density sector. Additionally, the surge in overseas migrants and students is likely to be funneling demand in inner city areas and precincts close to universities, transport and amenity hubs,” CoreLogic’s Research Director, Mr Lawless says.

Capital city house rents are up 24.8% since the onset of the pandemic in March 2020, while unit rents are up a smaller 19.5%, although they are quickly catching up.

“As rental affordability becomes more pressing, we are likely to see group households reforming, reversing the trend towards smaller households seen through the pandemic. Additionally, tenants are likely to be maximising their tenancy, sacrificing the spare room or home office to spread rental costs across a larger number of tenants. CoreLogic data has also shown a continued lift in rental hold periods, suggesting tenants may have a preference for holding onto their existing lease, rather than braving the search for a new rental.”

Not all cities and regions are still recording a rise in rents. Over the March quarter rents fell for Darwin houses (-1.5%) and units (-0.4%) as well as ACT houses (-1.3%). After historically being one of the most expensive rental 

markets in the country, the quarterly decline now has Canberra recording an annual reduction in house rents, down -0.8% over the past 12 months.

Top end houses and units lead prices recovery

The March Home Value Index confirmed First National Real Estate’s view that the market has neared the bottom of the current cycle, with the national house value index rising 0.6% in March.

Dwelling values were higher across the four largest capital cities and most of the broad ‘rest-of-state’ regions, led by a 1.4% gain in Sydney. The rise has been attributed to a combination of low advertised stock levels, extremely tight rental conditions and additional demand from overseas migration.

Advertised supply has been below average since September last year, with capital city listing numbers ending March almost -20% below the previous five-year average. Purchasing activity has also fallen but not as much as available supply; capital city sales activity was estimated to be roughly -7% below the previous five-year average through the March quarter.

The lift in housing values was most evident across the upper quartile of Sydney’s housing market. House values were up 2.0% in March and the upper quartile of the unit market was 1.4% higher over the month.


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 more appeal it holds. 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! 

It can also be valuable to request photographs from your property manager of specific things - the carpet in a high traffic area, the progress of some gardening work, or a more focussed look at wear and tear on walls and surfaces (do they need repainting?).   


WHY CONSIDER GOOD TENANTS WITH PETS?  


Even though for many families their pet is as much a part of their family as anyone else, landlords have historically rarely agreed, and pet friendly rentals have been difficult to secure.

According to Petcare Information and Advisory Service (PIAS) resources, more than 60% of households have a pet and less than 5% of rental property listings are pet friendly. This leaves a lot of people in limbo as to what to do regarding their chosen place of residence, as well as a lot of pets in life and death situations. More than 20,000 pets are euthanised each year after being handed into shelters by owners who don’t have the capacity to care for or house them anymore.  

Governments and legislators are starting to acknowledge that contemporary living has changed and that many laws are unduly harsh when it comes to peoples’ day to day needs. There is also recognition that current laws are simply oppressive to people’s freedoms and discriminate against renters, who should have similar basic habitation rights that owners do, where property residential behaviours are concerned. It’s also worth stating that pet owners tend to be better tenants! The fact that someone has decided they can take care of a pet and all the obligations and expenses that come with it, certainly says something about them and their capacity to be responsible. The need to care for the animals, feed them, manage their health, diet and exercise needs and pay for their food and medical bills is a commitment. Pet owners will generally prefer longer leases, through reluctance to unsettle their pet by moving too often. Many pet owners may even supply a CV with their pet as part of their application. It sounds strange but they know what they’re doing – after years of rejected property applications, they know that a few details around vaccinations and graduation certificates from obedience training schools can make all the difference.  

Becoming a ‘pet friendly’ landlord is easier than you think. There are of course issues to consider, such as what kind of pet it is, how much noise and waste it will make and what kind of mess and damage it will create. You can request pet references from prospective tenants if you like. But for the most part becoming a pet friendly landlord is simple. Speak to your property manager about additional clauses to add to your lease agreement relative to animals and their behaviours. You can also mark your property as pet friendly in your listing so that it will show up in First National Real Estate’s ‘pet friendly listings’ search. When listing your property for rent you can capitalise on your points of different by pointing out the ‘large dog friendly yard’ or the ‘sunny corner ideal for a chook shed’ in the property description. You should also finish the description by signing off with “will consider applications from tenants with pets”.