MULTI-SPEED RENTAL CONDITIONS
Rental markets are showing multi-speed conditions, with most of the capital cities experiencing an upward trend in rental growth in 2022, according to CoreLogic.
Nationally, rents were up 2.7% over the three months to April, taking the annual change in national rents to 9.0%. A year ago, the annual change in national rents was 4.9%.
Based on the annual change, house rents (+9.1%) are rising faster than unit rents (+8.7%), however this trend is changing sharply as demand for unit rentals increases.
“On a rolling quarterly basis, we are now seeing unit rents rising faster than house rents especially in Sydney and Melbourne where rental conditions across the unit sector were previously much softer,” Mr Lawless says.
Demand pivots from houses to apartments
“The shift in rental demand towards units reflects both rental affordability pressures, which are deflecting more demand towards the ‘cheaper’ unit sector, and the return of overseas migrants and visitors. Rental demand from overseas arrivals tends to skew towards inner city and higher density precincts.”
In Sydney, unit rents were up 3.0% over the three months ending April, a full percentage point higher than the rise in house rents (2.0%). In Melbourne, the difference is starker, with unit rents 3.6% higher over the past three months compared with a 1.2% rise in house rents.
The rolling quarterly change in rents is now outpacing the rolling quarterly change in housing values across most of the capital cities, which is supporting a rise in gross rental yields. Nationally, housing values were up 1.9% over the most recent three-month period, while rents increased 2.7%. The result is a subtle 2 basis point increase in the gross yield.However, in
Melbourne, the gross yield has lifted by 7 basis points from a recent low and Sydney gross yields are up 9 basis points from the recent low.
Despite the upwards trend, gross yields in both these cities remain well below historic averages at just 2.5% and 2.8% respectively.
Higher yields and long-term prospects for capital growth could see investors comprising a larger portion of housing market activity. Financial aggregates published by the RBA to the end of March showed the monthly gain in investor credit growth was at the highest level since August 2015, with the speed of investment credit growth surpassing owner occupier credit for the first time since December 2016.
Will there be a downturn?
With the cash rate set to move through a rapid tightening cycle, the trend towards a softening in the growth rate will become more pronounced over the coming months, before the national index starts to trend lower. CoreLogic research shows a strong inverse relationship between movements in the cash rate and the rate of change in housing values.
Although the housing market is expected to move into a downturn through the second half of the year, it is important to remember the context of the recent growth phase. Since the onset of the pandemic, national housing values have increased by 26.2%, adding approximately $155,380 to the median value of an Australian dwelling.
WHAT ARE THE OPTIONS FOR TERMINATING A TENANCY?
Sometimes good tenants go bad, sometimes they were never that good in the first place and sometimes life just happens, and a tenancy agreement needs to be terminated.
Landlord’s and Rental Providers do have some options, the best of which being identifying how a tenant may have breached one of the provisions of their lease. This could range from not paying rent or unapproved sub leasing, to damaging the property or running a meth lab and everything in between.
In most cases a tenant needs to have made the specified breach for a 14-day consecutive period, so paying rent a few days late every few months would not suffice. The landlord must prove justification for the termination and in doing so, can then initiate procedures to terminate the lease agreement. Landlords may need to plead their case to the relevant local authority and provide the tenant with sufficient notice to vacate. In this window of time, a tenant may find the opportunity to remedy the situation or respond and fight the accusation. In either of these situations, the option for the landlord to terminate the lease may disappear altogether. Immediate termination is only possible in extreme cases where the potential for serious damage or injury to the landlords or neighbour’s property exists. Situations like these are great examples of why property management is such a valuable investment, and a good property manager will do whatever they can to ensure both parties are treated fairly and equally, regardless of the circumstances.
THE ABC OF RENTAL REPAIRS
To protect both landlords and tenants, tenancy agreements have safeguards in place that define what action should be taken if something in a property needs to be fixed.
Repairs are grouped into urgent and non-urgent depending on their nature. Most leases require that urgent repairs be conducted immediately, while non urgent repairs must be made within 14 days of the written request being submitted.
Urgent repairs refer to things that impact on the safety of the tenants’ living environment – such as a burst pipe, a blocked toilet, water or gas leaks, or a malfunction that presents a safety issue.
Non urgent repairs are generally things the tenant can work around until a fix is in place – such as a broken dishwasher, loose tiles, or a mildly malfunctioning piece of furniture or equipment. Whatever the issue there is a simple process to follow that – regardless of whether you’re a landlord or a tenant - will ensure issues are dealt with efficiently and effectively every time.
A is for - Ask yourself whose fault it is
If the repair relates to damage due to wear and tear, general malfunction, or external factors (i.e., not something the tenant did directly) then the ‘fault’ lies with the landlord, and it’s their responsibility to take charge of the repairs.
If the tenant has damaged or broken something within the property, they must report it immediately, arrange for repairs and keep their property manager updated on the status of the repairs being conducted.
B is for - Be proactive
Whether you’re the tenant or the landlord, a proactive response is essential in every situation. As soon as damage is discovered, the tenant must report it to their property manager immediately to activate the process of repair.
The property manager will assess the report, determine if an urgent or non-urgent repair is required and decide based on the tenant’s report, who’ll be responsible for organising the repairs.
Once reported, the landlord should be proactive in arranging the repairs, or responding to updates from the tenants on the repair process.
C is for - Clear communication
If you’re the tenant reporting the damage, be specific about what happened, when and how. If you’re the landlord communicating about repairs, be clear and precise in a way that manages the tenant’s expectations well and assures them a solution is in motion.
Vague responses, unclear details and a dismissive attitude will come back to bite you in court so be clear; report things by email where possible and keep a record of everything including photos, samples, and email chains.
In all cases of damage, regardless of fault, the repairs must be done by an approved and/or qualified tradesperson.
A tenant can make repairs themselves if the landlord agrees but those repairs must be to the same standard as the repairs would be if done by a suitably qualified professional.