With housing affordability at an all-time high in most parts of the nation, the cost of living rising, interest rate hikes on the cards and wages stagnant, households are under considerable stress right now. And this stress does not exclude landlords, most of whom are hardworking mum and dad investors. This article shares some tips to soften the blow of a rental increase and keep landlord expectations in check.
While it’s easy to regard the historically low cash rate of 0.1%, which has been in place since November 2020, as nothing but positive, the truth is a little different. Firstly, it has led to home and rent values increasing astronomically. Secondly, it has enabled more Australians to access higher levels of credit, causing housing debt levels to soar.
CoreLogic’s head of Research, Eliza Owen, says high debt levels and stagnant income growth have put certain areas of the housing market at risk. For instance, the gap between houses and units has never been more pronounced and, since January 2021, first homebuyer activity has diminished, reflecting significant barriers to entry. This leads to more people needing rental accommodation, increasing the pressure on the rental market.
According to Ray White Group Chief Economist, Nerida Conisbee, Australia is on the cusp of a ‘Global Financial Crisis’ style rental disaster with most of Australia seeing rental increases of more than 10%, or $50 a week, over the past 12 months. That is a significant increase for renters, especially with the added burden of rising fuel costs and consumer goods prices, including groceries. Ms Conisbee added that the rent increases are unlikely to slow down in the near future, especially with international borders now open and more people arriving in Australia, the majority of those needing a place to rent.
Given mum and dad investors provide almost all of Australia’s rental housing right now, Ms Conisbee says rent control measures are not the answer as they typically lead to less rental housing and poorer quality homes. At the same time, if rents become too high, the risk of homelessness will rise.
The question is, as property managers, how can you manage this balancing act of rental increases and keeping landlord expectations in check? The tips below will help:
Demonstrate value to your tenants, not just the landlord
A tenant will be less agreeable to a rent increase if they have not been well looked after and the property is inadequately maintained. When a property is well-maintained, it is more likely to keep good tenants paying the rent on time and therefore avoid or at least minimise vacancies. They will also be more amenable to a reasonable rent increase. A poorly maintained property, on the other hand, is much harder to rent, rents for less and gives tenants a reason to leave.
Be proactive
Don’t just wait for tenants to come to you to report an issue that needs addressing. Be observant during routine inspections and create a property improvement plan to ‘future-proof’ your landlord’s investment and maximise their return. This is beneficial for both tenant and landlord. It keeps the tenant satisfied that they are being looked after. And it reduces costs in the long run for landlords because when you are on top of maintenance, things are less likely to break down.
Use technology to your advantage
Using a property maintenance tool like Maintenance Manager will make it easy to keep on top of maintenance and demonstrate best practice to both the tenant and the landlord. It will also free up your time to offer more personalised service and grow your business’ rent roll rather than getting bogged down with admin duties and chasing trades etc.
Providing outstanding service by being proactive and professional to both tenants and landlords, will help soften the blow for tenants when a rent hike is necessary because you have demonstrated the value they are receiving. It will also help you keep the expectations of the landlord in check if they are demanding a rate hike too often or asking for too much. After all, a happy tenant who always pays on time is better than no tenant because the rent is too high.
