Is it time to increase rents?

With vacancy rates around Australia being the lowest they have been for many years, many property investors can look forward to a rental increase this year.

What has changed?

Well…our property market moves in cycles. During property booms rentals tend to stay stagnant.  This occurs for a couple of reasons.

At the beginning of the boom phase, properties are usually affordable, and vacancy rates slowly increase as more tenants become home owners. At the same time more investors get into the market and place their newly purchased investment properties on the rental market.

The greater the supply of properties for lease at a time when there is relatively less demand means there is little opportunity to raise rentals, but often investors don’t mind too much as their properties keep increasing in value.

As the cycle moves on the market goes through a slump and then the stabilization stage of the property cycle where property prices didn’t go up and rentals remain stagnant for a while.

This has made the last few years a little disconcerting for many investors, but now as vacancy levels have fallen rents are increasing again.

At Metropole Property Management we are usually able to increase the rent when the lease expires.

To determine the optimum rent for our clients we see what rentals have been achieved for similar properties, using our extensive internal database plus those from industry bodies and research houses.

We don’t rely on advertised rentals, as these can at times be misleading – we look at rentals actually achieved

We also recognize that a hefty rental increase can be unsettling for a tenant and may make them consider moving.

While most landlords are asking for reasonable rental increases, we’ve have had others who are currently becoming greedy trying to push rents too high.  A few got caught out finding that tenants simply won’t accept this and use the higher rental as a good opportunity to move to new premises.

These investors have then been stuck with the cost of a vacancy including lost rental, advertising costs and letting fees.

Most tenants are well informed and despite the low vacancy rate tenants are unlikely to be willing to pay this high asking rental,

In summary now is a great time to increase rentals, but be sensible in what you ask for.

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Pamela Yardney

About

Pamela was a founding director of the Metropole Property Group. She co-authored the top selling book "The Australian Guide to Buying & Selling Your Home." In her articles she freely shares her years of experience as a property investor & developer and a property management expert. Visit Metropole.com.au


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