In my opinion, the issue I think we are going to face from a property management point of view, is that as a percentage of these new developments are being bought by foreign investors, there could potentially be a “rental guarantee” which is being offered and I see that this as having a negative impact on the rental market. Once you give an investor a rental return amount quite early on in the development and purchase phase, they are expecting that return upon completion and settlement and this poses an issue.
With interest rates being at a record low, I have seen an increase in tenants not renewing their tenancies and in some cases, breaking their lease to purchase a home and to take advantage of the low interest rates. This has therefore, had an impact on the vacancy rates in Brisbane’s Inner City. Although there are still a large number of renters on the market, their expectations of features within their rental property has also increased. They are coming to open homes with a mental checklist and are hesitant to apply for a property if the property does not meet their needs- why would they when there is a lot of properties for them to choose from?
Having these thousands of properties become available in 2015 and with the low interest rates, the expectations of rental returns need to be realistic in order to ensure minimum vacancy periods. I am finding that rental prices are being reduced now more than ever to accommodate the market and to minimise vacancy periods in order to ensure the landlords have an income stream from their investment.
Investors also need to keep in mind that inner city living will not appeal to everyone therefore may only attract tenants such as professional couples, students or the single executive and with an expected increase of the stock levels in 2015 how many of these “attractive” tenants are out there?
Sydney, Melbourne and the other states are not experiencing the flat rental market issue which we are facing here in Brisbane. In these other states, you hear about a line of prospective tenants at open homes eager to rent properties- something I haven’t seen in Brisbane since December 2014. Maybe it’s because it is a lot harder to purchase your first home or similar in Sydney and Melbourne than it is in Brisbane
Source R Patel is a Director at Urban Property Agents in Brisbane.