How’s the Residential Rental Market going?
It’s a common question from landlords of Residential Real Estate. There are two gauges that give the best insight to the answer – what’s happened to rental values and how hard is it to find a new tenant?
- Change in Rental Amount: Minus 9.8% over the past year
The publicly available information is often inaccurate. It’s usually derived from looking at the advertised rentals from a year ago compared to the current advertising. The problems with this are:
- Advertised rent is often higher than the final agreed amount
- Newly-built properties skew the average rental calculation so it appears to be higher than market reality
The best available information is found by researching the rental change for individual properties. We only look at properties that have recently been re-let, then we evaluate the percentage difference between the new rent and the previous rent. Properties that have been improved between tenancies are discarded. With a significant number of these price points, we can establish a reliable average percentage price change.
We looked at 97 properties that Marriott Lane re-let in the first three months of 2020 and the average change in rent over the past year rent was -9.8%
- Days to Find a New Tenant – Median 8 Days during the last quarter
The best measure is to look at the same group of 97 properties. It’s simple to record the gap between the dates when the previous tenant left and the new one moved in. Most agents don’t seem to track this, but it’s something that’s worthwhile to know. For the majority of 2019, our figure ranged between a very respectable 4 and 5 days. The latest three-month period shows that this has extended out to 8 days median. I think this admirable and I’m proud of the team for achieving this.
We expect that both measures will deteriorate over the next Quarter. Supply continues to rise without a commensurate increase in demand. New properties continue to enter the market and add to a large number of properties that have been previously dedicated to short-term rentals (Airbnb etc)
Many foreign students and workers have either, not arrived, or have gone home, so overall demand is lower. Affordability is clearly under extreme pressure with increasing unemployment and reduced incomes.
In the 2nd Quarter new Rents will be about 15% lower than where they were last year.
Retain your tenant. Adjust rent to the market rather than risk a vacant period, letting fees and a lower rent achieved. If you lose a tenant, set the asking rent at least 10% lower than the previous rent. Make sure your agent has superior systems and processes for finding and retaining tenants.