A combination of rent drops and rising vacancy rates mean Sydney’s rental market is currently heavily in the tenant’s favour, giving them the upper hand in rental negotiations. Let’s look at the best way for investors to deal with this and still make money from their investment.
Why is Sydney a tenants’ market at the moment?
It’s no secret that Sydney’s North Shore has seen some of the biggest rent decreases in the last 6 months, according to a January report from Domain. Median rental rates for houses have fallen by over $80 a week (down to an average of $1000 per week) on the Lower North Shore, with units on the Upper North Shore down $20 a week equalling a average rental of $530 per week.
In a tenant’s market like this, high vacancy rates are also common. SQM Research data shows that the Lower North Shore vacancy rates shot up to 4.3% in February 2019.
Added to this, the news headlines are full of talk of rent discounts, incentives, and other ploys to attract tenants. The fact that it is a tenants market at the moment is exactly that, a fact. So what is the best course of action?
Don’t be in denial
One of the biggest problems we see are landlords who don’t view their property objectively, as a prospective tenant would. It’s all too easy to become blinded and see only the benefits of your own property. But step back and consider for a moment what an outsider might say: What value does your property represent compared to others on the rental market right now? It could be worth visiting a few open for inspections on other rentals to see it for yourself….
And if you’re reading this thinking “that won’t affect me…”, or hoping that your luxury property will be shielded from the current market, that isn’t the case, no property is immune from the challenges of a tenants’ market.
What investors should do when the market favours tenants
Long vacancy periods are problematic for a lot of landlords, because it means you’re out of pocket for your mortgage and other associated costs, instead of having regular rental income to take care of it.
With the market in the tenant’s favour they have the advantage of being able to be more selective and picky, so your property might not always be at the top of their list.
More importantly – you don’t want a property to go old and stale. Tenants are increasingly aware when something has been on the market for a while, so price it right at the beginning of your campaign to create a sense of urgency, and make it appealing.
You’ll hear a lot of experts say that dropping the rent is the best way to get someone in your property. In our view, this is sometimes the right approach to deal with these costly vacancy periods, but it’s certainly not the only way to go about it.
What we think works better than a rent reduction is a value add – by offering something extra to tenants, you can get much more interest in the rental without compromising on price. This might be adding sought-after features like air-conditioning, offering garden maintenance or even changing your policy on pets, (you can always chat to your property manager about what will work best for your property). This also starts the relationship off on a collaborative foot which some tenants really like. It shows that the landlord is reasonable and actually cares about the tenant and the property.
Be flexible and creative rather than cutting right to price. Think of other incentives like a holiday rent free period (we will not charge you rent for 2 weeks of the year so you can afford a better holiday). Or consider incentives for longer leases in order to minimise rental vacancy periods. Or even offer to accept pets (67% of Australians have pets – but not many rentals accept them, yet… this gives you a large advantage over other listings).
Whichever way you approach a tenant’s market, be prepared to negotiate and be open to different ways of finding and keeping happy tenants.
The role of creative marketing and flexibility
Good rental marketing is about much more than just Domain.com.au and Realestate.com.au. Those two sites are important to have in the mix, yes, but if you stop there, you’ll miss heaps of opportunities that come from being a bit more creative and trying something new. This might include:
- Social media, on your property management company’s page and on pages of relevant local businesses
- Direct mail drops to neighbours
- New accommodation channels like Airbnb, especially for short-term rentals
- Targeting local corporate businesses looking for homes for relocating staff
- High quality photography
If you can be flexible, you’ll find that it pays off. One thing we often suggest to landlords is being flexible with access and allowing private inspections with prospective tenants at a time that suits them. It does take a bit of extra effort, but its effort that’s worth it to fill a vacancy.
The importance of a great property manager
All of these tips are relatively easy to do, but it’s not that common to find a property manager who’ll go the extra mile. The best way to deal with a market that puts the tenant first is to find a property manager who’ll put you first. A professional property manager who genuinely cares about the performance of your investment will do whatever they can to help, which is exactly the attitude that leads to successful tenancies in challenging times.
Contact us now to talk about ways to handle a tenants’ market.
At Property Providers our core purpose is “Helping People Live Better”. As Sydney’s most flexible residential rental agency we are totally focused on Property Management and renting “Your Property, Your Way”. We have designed 6 different rental services covering all facets of Long-Term Leasing as well as Short-Term Stays. Unlike franchise real estate agencies, we see the value in pragmatism and flexibility. Whether you want to rent your property furnished or unfurnished, for 6 months or 5 years, we will manage your property, your way. Our bespoke marketing strategies deliver discerning international tenants that understand quality and are prepared to pay for it. If you would like to learn more please visit our website or call us on +612 9969 7599