WA landlords urged to take reality check on rents as demand for executive rentals begins to moderate

Landlords in Perth have been urged to take a realistic approach to setting their rents in the face of changing market dynamics says Ian Cornell, Chairman of Professionals Real Estate Group.
Mr Cornell said that low interest rates had seen the flight of a number of tenants from the rental market into the first home buyer market during recent months.
“This trend is expected to continue during 2013 which will mean greater choice of rental properties becoming available, particularly at the upper end of the rental market. That said, those properties with a weekly rental of less than $500.00 continue to attract heated interest from prospective tenants, adding to the current 2% vacancy rate across metropolitan Perth.
“At the same time, the resources recruitment packages seem to have peaked in Western Australia, having a significant impact on the executive rental market. Whereas previously key personnel had been recruited with an employment package which may have included significant housing allowances or company leases.
“This trend started in the higher end of the rental market about six months ago with declining demand for rental properties that had been enjoying over $1000 in weekly rent. In more recent weeks, Professionals has also recorded a declining demand for rental properties priced above $700 per week.
“The reality is that the resources and mining industry is not making the same level of demands on high-end housing as they were previously. Keeping in mind the diversity of industry personnel utilised in this industry, so when projects are postponed, delayed, cancelled or downsized the effect is for less people in need of local housing.
“At the same time a key aspect of a recovering residential sales market is to have increasing and high rentals of which appears to have peaked around 6 months ago in Perth.
“When the equilibrium of the cost of renting a property becomes similar to a mortgage repayment, then tenants review their decision to rent and start looking to buy. This of course does not happen immediately or en masse but in sequence of the leases expiring.
“Similar patterns of rising and falling demands for rental properties in Perth have occurred in the past due to the impact of interest rates and the affordability of properties.
“We are currently entering the cycle of a lessening demand for rental properties above $1000 per week due to the increasing affordability of owning a home and landlords should factor this trend into setting rents as current leases come to an end.
“The dynamics of the property market is constantly changing and landlords need to take a reality check when setting rents rather than taking the approach that rents are on the constant rise. For example, if your rental property achieved a weekly rent of $900 over the last year, it does not mean that it will achieve the same or even a higher rent during the coming year. It may be the case that the property may achieve a lower rent as the demand for executive rental properties moderates.
“Our recommendation is to listen to your property manager as they are at the coal face of the market on a daily basis. “Your property manager will be able to give independent advice on local vacancy rates and weekly rents being achieved for properties similar to your own,” he said.
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