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With rent prices for Australia’s combined capital cities experiencing a decline over the past year, investors should be mindful of what to expect in the current market.
Blogger: Shane Kempton, CEO, Professionals Real Estate Group
The latest national rental figures produced by CoreLogic show that for the year ending May 2016, weekly rents in the combined capital cities of Australia fell by -0.3 per cent. This is the worst performance on record for the national rental market and represents a major turn-around from the 1.5 per cent national growth in rents achieved during the previous year.
Falling rents have been driven by a surge in investor activity over rent years, which has led to a major increase in the supply of rental properties. At the same time, the softest wages growth on record has limited the financial capacity of renters, who are now gravitating towards cheaper rental properties.
The biggest danger landlords face in the current market is for their existing tenants to leave and the property to remain vacant for an extended period of time.
There is an old saying in real estate that ‘the tenant is king’, and this is very much a truism in the current Australian property market.
In the current property market, it is critical that landlords reduce vacancy rates by offering the highest level of service to their existing tenants.
If a tenant leaves a property because they are unhappy, the outcome for the landlord may be lost rents over several weeks as they try to find a new tenant, and at the end of the day they might have to accept a lower rent.
One of the most common reasons tenants leave a rental property is that the landlord does not address simple maintenance issues like fixing a broken air conditioner or faulty shower.
This problem is particularly common with landlords who manage their own properties, as they are often too busy to look after issues raised by tenants, or are simply not in contact.
During times of very low vacancy rates, when tenants are struggling to find accommodation, landlords who provide a lower level of service can get away with this behaviour because tenants have very few choices.
If you are too busy to manage your property, then it makes sense to hire a professional property management company.
This will ensure that the property is regularly inspected and kept in a good condition. It also means that the tenant will have someone they can easily contact to address a problem at the property, whether it is after hours or on weekends.
Other benefits of using a professional property management company include: