SMALLEST MONTHLY RISE IN RENTS SINCE 2021
The national rental index increased by 0.6% in July, the 35th consecutive month of increases, but the smallest month-on-month rise since December 2021.
Slowing rental growth has been most evident across regional areas of Australia, where the combined regionals rental index increased by only 0.2% in July, the lowest monthly rise in regional rents since June 2020. Alongside the easing in rental growth, regional vacancy rates have moved higher, from a low of 1.3% in early 2022 to 1.6% in July. Although regional vacancy rates have risen, they remain half of the decade average (3.2%).
Capital city rental growth has also slowed, recorded at 0.8% in July, which was the lowest monthly rise since December last year. Hobart (-2.1%) and Canberra (-1.1%) were the only capitals to record a drop in rents over the most recent three-month period. These are also the only two capital cities where vacancy rates have risen more than a percentage point over the past 12 months, reflecting a better balance between rental supply and demand.
The strongest rental conditions continue to be seen across the unit sector, where rents were up 2.9% over the three months to July nationally, compared with a 1.9% rise in house rents. Looking at the data in more detail, across the capital city and rest-of-state regions, the unit markets of Perth (4.3%), Melbourne (4.0%) and Brisbane (3.8%) stand out with the fastest rate of rental growth over the rolling quarter.
At the other end of the spectrum, the largest decline in rents over the rolling quarter was in Regional NT, where house rents were down - 6.4% over the past three months, alongside Hobart where house rents were down -2.2% and unit rents were -2.0% lower.
Since January 2022, the unit sector across the capital cities has consistently shown a higher rate of appreciation compared to houses. This is likely due to several factors such as more affordable unit rents, increased demand for medium to high density accommodation, and supply constraints with approvals below the decade average since 2018.
Housing value growth moderates as listings rise
CoreLogic’s national Home Value Index (HVI) rose 0.7% in July, marking a fifth consecutive month of housing value recovery. Since finding a floor in February, the national HVI is up 4.1%, following a -9.1% decline from record highs in April 2022.
Nationally, home values remain -5.3% below the April 2022 peak, with only Perth, Adelaide and Regional South Australia recording a new cyclical high in dwelling values through July.
While housing values are continuing to record a broad-based rise, the rate of growth has marginally lost momentum over the past two months, slowing from 1.2% in May.
CoreLogic Research Director, Tim Lawless, says the most substantial reduction in growth has occurred in Sydney.
“After leading the upswing, the monthly pace of growth in Sydney housing values has halved from a recent high of 1.8% in May to 0.9% in July. Sydney has also seen a significant rise in the number of fresh listings added to the market, 9.9% higher than the same time last year and 18.0% above the previous five-year average. An increased flow of new listings provides more choice and may be working to reduce some of the urgency felt among prospective buyers,” he said.
GROSS RENTAL YIELDS NATIONALLY
Sydney 3.1%
Melbourne 3.5%
Brisbane 4.2%
Adelaide 4.1%
Perth 4.9%
Hobart 4.2%
Darwin 6.5%
Canberra 4.0%
National 3.8%
HOW MUCH DOES PROPERTY MANAGEMENT COST?
New landlords are often uncertain about how much a property manager costs and lean towards doing it themselves to save money. However, while self-managing may reduce some of the cost in theory, few consider the opportunity cost of how much personal time, stress and administration is needed – especially the steep learning curve. When you get the right property manager, you’ll have a better chance to get market rental rates and properly qualified tenants. This secures a stable rental income that ideally covers your property management costs.
So, what do we charge? There are upfront and ongoing costs that come with property management, though many of these would be costs you’d incur anyway – with the extra cost of having to do the work yourself. Initially of course you’ll have to pay for things like advertising and photography for online and print listings of the property. There’s also usually a letting fee and a lease preparation fee that covers the administration of a new tenancy being implemented – these don’t usually get paid until a tenant has been secured. Other upfront costs may be compliance or safety related, as well as any necessary repairs and maintenance to get the property tenant ready. Once that’s all done though, your only outgoings will be the ongoing property management fee, which we’re happy to go through with you in detail before you sign with us.
FOUR BIG MISTAKES SELF-MANAGING LANDLORDS MAKE
Self-managing your rental property comes with a range of legal and financial responsibilities, so it’s important you’re clear on how much work you want to put in to being a landlord and what elements of renting out your property might be better outsourced.
These responsibilities are often overlooked, so novice landlords are inevitably vulnerable to making mistakes. We don’t want that to happen and, as much as we’d love to show you all the advantages we bring to the table, we’ve outlined in this article the most common mistakes we see that bring landlords to our door for help.
Inadequate selection and screening of potential tenants
In an effort to save money on advertising, self-managing landlords will often use their own networks to find a tenant for their property. This may be a cousin’s husband’s mate, or a friend of a friend from social media.
While using your contacts may seem like a good idea, someone your friend says is a great laugh at the pub doesn’t necessarily make a great tenant. This personal connection can also influence landlords into thinking they don’t need to do a background check on their prospective tenant. A verbal reference in a social setting is not the same as a qualified reference from someone who has dealt with that tenant in the same capacity – such as their previous landlord.
These kinds of oversights can be disastrous – overlooking information such as why their last tenancy ended (were they evicted?); what their current employment situation is (can pay their rent?); and why they’re currently between residences. A reference check is also important when it comes to unpaid rent or property expenses. Without that history there may be no way of chasing a tenant who’s disappeared.
Neglecting to tick all the boxes
Finding a lease and condition report template online might be fine, but is it customised to your investment property, or to the specifics of the arrangement
with your new tenant? Damage that occurs during their tenancy can only be evidenced by a report that states the condition of the property before they moved in – their word or your word will not stand up.
A customised lease and condition report that is signed by everyone and agreed upon as the status quo at the time of the tenancy commencing is your only security when it comes to property damage, maintenance and care.
Insufficient processes around bond and rental income
First and foremost, before a tenant moves in a bond must be secured, so in the event of the tenancy ending, any miscellaneous damages can be dealt with using this bond as collateral.
Another hidden loss that self-managed landlords unknowingly implement comes from not accurately calculating rental income. A full calendar year is not evenly distributed across 12 months exactly so monthly rent should be calculated annually as a calendar month amount rather than simply billed as a monthly amount.
Landlords that keep effective rental records will learn this quickly enough – while those who don’t follow accurate record keeping procedures will usually find out far too late about all the income they’ve missed out on.
Failing to obtain Landlord Insurance
Landlord Insurance is an enhanced form of home (building and/or contents) insurance, which includes cover for the events that a traditional home insurance policy would be expected to cover, such as storm and fire, but has additional features which are applicable to you as a landlord such as cover for damage caused by tenants’ pets, loss of rent, damage by tenants to contents, liability, rent default or clean-up costs associated with illegal drug production.
You may never need it but there can be significant interruptions to your property’s income earning potential when things go wrong.