What happens when rents keep rising and rising and rising…
Date: 10 May 2023
Under any market conditions, determining the rent rate for a property is a four-pronged process.
1. Research asking prices for comparable properties. As part of this check, it pays to look at how long properties have been advertised for rent. If a property has been advertised for longer than a couple of weeks especially in this market, it may be that the price is too high, the property or the terms are unattractive or some other reason. Either way, a vacant property is giving you nothing.
2. Check bond centre lower, median and upper quartile rental figures. These figures are taken from a rolling 6-month period from new bonds lodged. They do not show specifics of a property, but are a useful guide for where rents are sitting and are released monthly.
3. Compare with prices received for similar properties recently rented in house.
4. Knowledge of factors like location, amenities offered, property condition, and specific terms being offered.
After having done all the research, it is important to reach a figure that is fair and based on facts, and not so high that it will turn good potential tenants away. I saw a comment on a local social media rental board last week, the person posting said even if there is a property available, it just leaves you feeling “ripped”. If you get the pricing wrong you could expect more vacancy and unreasonably fussy tenants with very high expectations about the property’s presentation and ongoing functionality. There has also been a noticeable increase in tenants taking tribunal cases against landlords to prove market rent.
The local rental market at the moment has lots of variations and is very up and down in terms of asking prices. We write about one of the reasons for this in the latest trends.
In our business, our advice has always been to set a reasonable price that gives you options, longevity of the tenancy and keeps vacancy at zero or very close to zero. Raising the asking price to move with the market is good but you should take all other factors into account at the same time. If you focus only on the weekly rent rate, you are potentially missing the bigger picture. If you focus on trying to make the rent cover all of your holding costs, particularly for a newly purchased property you might become very frustrated indeed.
Property is a long-term investment and long term you will find that good tenants and high occupancy trumps everything else, giving you an overall strong return and less headaches which enables you to hold on to the property for longer. So, it pays to move with the market, but in the most balanced way you can.
