John McGrath – How to get the rental home you want
Tenants will be relieved to know we’re now seeing a moderation in rent rises after some very steep increases in 2022.
CoreLogic data shows that combined weekly capital city rents increased by 10.9% and regional rents increased by 7.9% over the 12 months through to the end of January 2023. That’s certainly high, but if we drill down to the quarterly rates of growth, we are seeing some moderation now.
The data shows growth in capital city rents slowed to 2.3% in the December quarter and continued to ease in January. This compares to a 2.7% increase in the September quarter and 3% in the June quarter. So, there’s a gradual slowdown in the market.
However, it might not feel like it yet for renters in the market today. Rental stock is very low due to a chronic undersupply, and the return of migrants is adding to demand.
In such an environment, landlords have been able to raise rents to offset the impact of rising interest rates on their loans and rising inflation on all their costs, such as insurance, council rates, water rates and repairs.
We’ve seen a particularly strong increase in apartment rents in Sydney, Melbourne and Brisbane over the past year. Rents are up 14%-16% annually, so that’s well above the national average.
But keep in mind that rents plummeted in these inner city areas in 2020 when migrants and international students left Australia at the beginning of COVID-19, so that 14%-16% increase is coming off a low base.
Of course, it’s returning migrants and international students now pushing rents back up in some areas. Most migrants settle in or around our CBDs upon arriving, and most international students want to live close to their universities, most of which are in inner city areas.
Given the strong ongoing competition for rentals, I asked Katherine Gaitanos, head of property management for our company-owned network, to provide some tips for tenants to help them get the rental home they want.
Although it’s disheartening for tenants to see scores of other people at inspections, there is ample opportunity to make yourself stand out in the application process. The more you stand out, the more likely you’ll be selected for the tenancy.
Katherine provides the following tips:
- Most agencies use online application forms however they will use different platforms. Its important to know the platform the agency is using in advance allowing the tenant to be well prepared. We highly recommend pre-applying so the agency can commence processing prior to the inspection.
- Ask your current or previous property manager for a copy of your rental ledger to include in the application or login to your online tenant portal and download the ledger directly. This provides verifiable evidence that you pay rent on time.
- Include character references in your application from your employer or previous property managers. If you have pets, include photos, cover brief and references for them, too
- Dress well for the inspection, arrive on time and bring a tape measure to check your furniture will fit. If you unable to attend, ask the agent for a video link.
- Be willing to move in as soon as the property becomes vacant and be comfortable with your offer set out in your application. Due to new rent bidding regulation agents cannot disclose if an higher offer is received.
- If you miss out, ask the property manager about upcoming listings. It’s worth developing relationships with managers as you might get a head start on the next suitable property.
Finally, a word for aspiring investors. This is the year to buy your next long-term investment. I believe we’re either at or approaching the bottom of the market cycle, and the data shows that while property prices are still falling, they are doing so at a more moderate pace. This suggests returning buyer demand is supporting prices.
Gross rental yields have increased to an average of 3.6% across the capital cities and 4.5% in the regions. Yields are now at their highest level since late 2019. So, there’s an opportunity in today’s market to buy a high-quality investment property at a discount and rent it out very quickly on a great yield. That’s a real win-win.