You’ve probably heard plenty in the news in recent times about the fortunes of the Perth rental market.
For some years, a tight and buoyant rental market had been the product of a booming, mining-driven economy. It led to a shortage of supply, an upwards pressure on average rental income, and an extremely low vacancy rate.
Not so much now.
It certainly hasn’t become a tenant’s market, but the balance is being corrected.
If all this seems gloomy, don’t dismay, the market is still buoyant - just not as spectacular as it had been.
The factors affecting this are easy enough to identify. The declining iron ore price, caused by a downturn in global demand (specifically the Chinese economy) has led to an easing of Western Australia's economy. With a slowing of the economy has come lower rental incomes and less demand for rental properties. That has directly affected the market in the form of fewer mining-related occupancies, but it’s not all that’s causing the swing.
According to statistics from REIWA, there were 8,228 properties available for rent at the beginning of September, an increase of 2,341 over the same last year. In 39% increase in vacancies is substantial!
When looking at this kind of data in a confined period, it’s easy to forget the past. Just three years ago (March 2012), there were 14,300 properties available for rent!
The increased recent supply has seen the median weekly rent fall to $420 for the three months to July 2015. Coming off a high of $470 just 18 months ago, this adjustment in rental incomes has had an effect on some owners who have not necessarily factored the changing market into their expectations.
No surprisingly, the vacancy rate has also risen and currently sits at 5.2%. The result? Disappointment when a property does not re-let quickly and a reluctance to accept any amount lesser that that which was enjoyed in a far stronger market.
As I mentioned, the economy is only one driver contributing to the correction.
A flow on effect of the healthy economy and under-supply has been a marked increase in development; particularly multiple dwellings. Many of these new developments are now entering the market contributing to increased supply in a softer market.
The days of leasing properties in the first week of advertising and seeing ten or more prospective tenants lining up to apply for a property are on-hold for the moment. So is the bidding war to get a place to live that was commonplace for a short while.
In many ways, this where the real work of property management begins. Pretty much anyone can let out a property when the market is inflated - they may not be able to manage those properties, but they can get the ball rolling well enough.
When the market adjusts, the proficiency of your property manager to both identify suitable tenants and manage your property is tested. It’s then that the cream rises to the top.
Our experience at One in recent times has been a reverberation of those factors in the marketplace. A steady demand for rental property continues yet at lower levels of rental return and with longer vacancy periods than previously. Rather than a week or less, four weeks is now common, sometimes longer.
This is a market in which prospective tenants have more choice and more options. Rather than accepting anything, they can be more discerning. Properties that are renovated or newer in a strong location have a distinct advantage.
What’s my take on this market and the management of your property in this market?
First, be discerning about your appointment of a property manager. Ensure that their business is one dedicated to property management rather than having it as an adjunct service. When things aren’t flying, the eyes are likely to divert from the business unit that’s performing less spectacularly.
Second, check their experience - both within the industry and within the area that you are leasing your property. This isn’t a market for a fly-by-nighter.
Finally, ensure your property manager is giving you good information, and good access to information.
You should be able to access all details for your property portfolio online whenever you choose to.
We’re all about these things at One Management. With over fifty years of collective management experience, we are not only dedicated to property management, we’re driven by process, communication and action.
If your property manager is not performing, get another one. This is a business relationship after all - an exchange of a service for your money. If the service you’re receiving at the moment isn’t hassle-free, stress-free and profitable for you, it’s time to move on. When you do, I’d want you to remember that there’s One way to manage…and we’re good to go!
All the best with your investment!