Huge supply of units putting downward pressure on rents

It is becoming abundantly clear that the deluge of rental properties coming onto the market is putting huge downward pressure on asking rents with the median rents in some suburbs falling by over $120 per week. Landlords are facing the stark choice of dramatically reducing rents or face the prospect of having their properties sit empty for months as more and more stock comes online.

The number of flats listed on real estate websites to rent has more than tripled in 15 postcodes, including around Gordon, Miranda, Botany, Sutherland and Homebush. As new apartments come online, landlords are facing a one-two punch of falling rents and the fact that their investment properties are less attractive to prospective tenants relative to the brand-new apartments being built in close proximity to their own.

Sydney-wide rental vacancy rates have almost doubled from 1.7 per cent 2017 to 3.2 per cent this year. However, in areas where there have been a large number of apartment blocks developed in the upper and lower north shore and the hills district, the vacancy rate is more than double this average. In what may be surprising to many, the vacancy rate in the Sydney CBD is currently 8.1%. To make matters worse, there is a further pipeline of 194,000 multi-unit developments due to come online in the near future across Sydney.

Landlords are increasingly looking to secure tenants at much lower rents than they anticipated when they purchased the investment property knowing that the situation could be worse in the near future. It now takes an average of 32 days for a tenant to be found in Sydney, with it taking up to double that in some areas of Sydney. For many landlords this is a completely new scenario compared to previous years where there were many more prospective tenants relative to the number of properties on the market.

The upshot of the huge volume of supply is that for the first time in years landlords are now considering the impact of vacancies on the expected cashflows from their investment property. The smartest investors are taking a commercial approach to their investment properties, and understand that in many cases doggedly hanging onto a set amount of weekly rent irrespective of changed market conditions can cost them dearly.

Certainty Property was founded on the basis that as property managers our incentives should be totally aligned with landlords. It is our job to promptly find a great tenant and ensure they continue paying the rent. When a property is vacant or the tenant is in arrears, we continue paying the rent. We also continue paying an agreed market rent for the life of the agreement even when rents fall. This is the Certainty Property difference.

If you would like to know more about how Certainty Property can upgrade your property management experience, then please give us a call on 1300 577 298. Alternatively, to find out how much extra rent you could receive with Certainty Property managing your investment, fill out our rent calculator.