Sentiment and Sentimentality
by Richard Thurtle
When people ask us whether anything has changed in the residential property management market recently, it's hard not to jump to a familiar line of recent times: "It's pretty flat with more of the same".
It's a statement that's difficult to argue. Recent REIWA statistics peg current vacancy rates at 6.7% - 15% higher than the same time last year despite a recent 1% drop. Over 10,000 properties are currently vacant and available for rent in the metropolitan market. Meanwhile, median rental prices have fallen more than 15% with the prognosis, you guessed it, "pretty flat with more of the same".
In all this, though, we've noticed the effect that sentiment and sentimentality are playing in the market. The sentiment of property managers amidst the sentimentality of property owners.
Let me explain.
While the current indicators for the rental market are hardly brilliant, the way in which we respond to them as property managers has a significant impact on our success and the results we achieve for our owners. Some owners I have met with recently have told me that other property managers they have talked with have been negative to the point of depressive.
At One, we want to take the positive view. There are plenty of properties available for rent and plenty of people continuing to rent properties. Our job is to bring the energy, skill and experience to match those renters with the properties to rent - not to bemoan how the current high vacancy rates. The sentiment that we bring to the workplace and the market plays a part in the results that we achieve for our clients.
Market sentiment doesn't change current reality but, in time, it certainly plays a part in its shaping. It also changes the atmosphere of the workplace, so we're quite intentional in encouraging stories of the upside in the current market rather than validating negative sentiment.
The flipside to this is the occasional hint of sentimentality that we've observed amongst some owners in the market.
Despite the raw facts of the current market, it doesn't take a long memory to recall when tenants were fighting one another to rent properties, queuing to inspect and lodge applications, and outbidding one another to secure properties for rent. When these memories are fresh, it's sometimes hard to accept the current state of play. Except that the market now demands it. The market is not hot but cool and demands a revision of approach by owners and property managers alike.
Suddenly, tired properties with kitchens that should have been upgraded in the last decade, or paint jobs that bear the scars of previous tenants, aren't overlooked - they're unacceptable.
The rental income that may have been reliable before are suddenly patchy and have been subject to significant reductions. For those who missed the changes in the market or are clinging to sentimentality, this will likely lead to vacant properties.
With no queues for properties, there's been a revision of what's out there and what's possible. A new kitchen at $50/week less than the property you're in seems pretty attractive when the market is suddenly yours for the taking.
As sentiment and sentimentality do their work, there's an even greater need for honesty and transparency. To tell an owner that their property remains vacant because the weekly rent that they are demanding is too high, or that we might need to consider either an incentive to rent, or that some improvements to the property may be required, can be a bitter pill to swallow. But it's still one that must be swallowed. Ignore this reality and the property can remain vacant for even longer.
No one likes earning a lower yield from a property than they may have only a year ago, but it's a reality that we often need to bring into the light. No one likes the drop in income that comes from a having a property vacant for a protracted period either.
Amidst the tension of sentiment and sentimentality, lies hard work, tenacity and transparency with our clients so they can realise the best result in a tough market.
If you're in the rental market right now then there is no doubt, there are some big wins to be enjoyed for tenants. For owners, though, it's just a little cloudy with the weather outlook 'continuing cloudy'. It's not a time to drop the bundle, but to work to lighten the load by adjusting sentiment to the current market and cutting your cloth accordingly.
Most property managers can make hay while the sun shines brightly, but it's the experienced ones who continue to thrive when the clouds close in. As always, if you have a property to manage, we're ready to show you the One way to manage!