WHAT PROPERTY MANAGERS ARE SAYING ABOUT VACANCY RATES
The Real Estate Institute of South Australia recently hosted a meeting attended by about 70 Property Managers who work in the south of Adelaide. Their comments about the state of the industry were very telling and worth repeating.
They all repeated what we have said previously that vacancy rates have increased but they also emphasised that lease breaks are now so much more common.
Legislation allows a landlord/agent to start advertising a property for lease up to 28 days before a current lease expires. Normally this has been ample time to find a new tenant such that the transition time between tenants has been as little as a day or two. When I first entered the industry, about 14 years ago, we only started advertising 2 weeks before the end of the lease without any problems.
But at this meeting the consensus was that average marketing times are now about 6 to 8 weeks! Several Property Managers gave examples where prime properties took much longer than this. One agent said they had a very tidy 2 bedroom unit in Glenelg that was reduced to $295 per week and took 5 months to rent!
Longer times to find a tenant are becoming common place and they come with a reduced rent.
It was generally felt low interest rates were to blame as they make home ownership a similar cost to renting. This is obviously great for a lot of people but it’s changing the real estate landscape that has been taken for granted for so long.
Tenants who want to break a lease so they can buy are another symptom of this change in the market. So now these tenants who want to buy are starting to feel the pressure of these long leasing times because they have to pay their new mortgage plus their old rent whilst a Property Manager looks for a new tenant to take over. If a Property Manager finds they have to reduce rent to spark interest in this new market the old tenant will be liable for this loss of rent the landlord would have otherwise been entitled to.
Landlords need to adjust or suffer as the market finds its new normal and tenants need to reconsider how they break a lease.
They both need to be wise about what they are renting. Landlords need properties that are attractive, offer good facilities and represent value for money. Those who don’t adjust will become casualties but those who can respond positively to this new market will continue to prosper as their competition dies out.
Now more than ever investors will need to have a professional and impersonal eye on what the market is looking for if prosperity is going to continue for them.