What falling rents mean for Perth landlords

jarrad tnStatistics indicate Perth properties are facing declining returns, but is this set to continue?


Blogger: Jarrad Mahon, Investors Edge Real Estate

With managing properties in 126 suburbs of Perth, I can say with confidence that the Perth median rental price statistics do not show just how much the rental market has dropped in many Perth suburbs. This has had a major impact on landlords, some tenants and agents.

The statistics don’t yet show how bad the drops have been
According to REIWA statistics since October 2013 the Perth median rental price has dropped by 6.25% from its highest price of $480pw to now at $450pw. The total number of properties on the market for rent has risen a whopping 54% from 3827 to 5896. I am no statistician but I have seen the median rental price lag the increase in number for rent, so I fully expect the true state of the rental market is still to show up in the median rental price.

The Perth CBD was first to feel the slowdown in our mining sector and 10% drops in price were normal, some of the furnished apartments drop as much as 20-30%. I have then seen the drops in price ripple further out from Perth like a wave and I would now be hard pressed to find a suburb that has not dropped by less than 10%.

The impact on Perth landlords
It has been very difficult for most Perth landlords to face a 10% drop in their rental price when their property comes up for re-leasing.

We have tried to prepare our landlords by referencing the most current rental data and making sure their properties are well presented to stack up amongst the greater competition on the market.

For some landlords finding the extra $40-$60 per week in their budget has been a challenge but what can hurt far more is the cost of having a property vacant.

So if they are not getting enough enquiry on a property within the first 3-4 days and the marketing is solid, they are far better off to revise their price quickly and that way ensure they are getting enough quality tenants to choose from.

It’s not all good news for Perth tenants
Sure tenants that are looking for a rental have a lot more choice at reasonable prices now. But it is really difficult for the tenants that have to break their lease.

What makes it worse is that in previous times tenants have overpaid to secure a rental under lots of competition, so the drop in price to find the market rate can be larger. The outgoing tenant is required to pay the rent until a new one is found and if the rent is reduced to attract enough applicants, the outgoing tenant has to agree to pay the difference in rental price until the end of their lease. Which can mean coming up with an extra 1-2 weeks rent.

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