{"id":5510,"date":"2015-08-19T08:00:19","date_gmt":"2015-08-18T22:00:19","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5510"},"modified":"2015-08-19T08:00:19","modified_gmt":"2015-08-18T22:00:19","slug":"what-to-do-in-a-softening-rental-market","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/what-to-do-in-a-softening-rental-market\/","title":{"rendered":"What to do in a softening rental market &#8211; John McGrath"},"content":{"rendered":"<p><strong>Rental returns are back in the news again, with the weakest growth on record.<\/strong><br \/>\nBut it isn&#8217;t necessarily the dire situation it&#8217;s made out to be.<br \/>\nIn his recent column in\u00a0<a href=\"http:\/\/switzer.com.au\/the-experts\/john-mcgrath-property-expert\/what-to-do-in-a-softening-rental-market\/\" target=\"_blank\" rel=\"noopener noreferrer\">Switzer<\/a>, John McGrath gives some great tips on how to best handle periods of weak rental growth.<\/p>\n<h4>Here&#8217;s what he had to say:<\/h4>\n<p>Rental returns across the combined capital cities have recorded their weakest rate of growth on record.\u00a0<img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"alignright\" alt=\"John Mcgrath\" src=\"https:\/\/i0.wp.com\/puassets.s3.amazonaws.com\/wp-content\/uploads\/2015\/07\/JohnMcgrath-e1436853066209-300x234.jpg?resize=243%2C190\" width=\"243\" height=\"190\" \/><br \/>\nA new report from CoreLogic RP Data shows rents have grown by just 0.9% over the past year and that\u2019s the slowest rate of growth since they started compiling data in 1995.<br \/>\nThere\u2019s a couple of reasons why this is happening.<br \/>\nFirstly, there\u2019s a construction boom going on, particularly in Sydney, Melbourne and Brisbane.<br \/>\nAs we all know when you increase supply to a point where it meets or exceeds demand, you get a softening in prices.<br \/>\nSecondly, we\u2019ve got a huge number of investors \u2013 both locals and foreigners, buying property and this is adding to the supply of rental homes.<\/p>\n<h4>So let\u2019s look at the flipside<\/h4>\n<p>It\u2019s great news for renters and frankly, they\u2019re overdue for some good news.<br \/>\nLandlords are enjoying record low interest rates and yields of 4-6%, or even higher, so many of them are in the enviable position of having neutral or even positively geared properties right now.<br \/>\nAlso, rental growth might be slowing down but it\u2019s not going backwards, so many landlords won\u2019t be in a position where they have to reduce rents, they\u2019ll just have to keep them at the same level for a while.<br \/>\nMore properties available for rent means more options for a growing community of renters \u2013 especially Gen Y Australians, many of whom have resigned themselves to a life of renting in expensive cities like Sydney.<br \/>\n<strong>When supply increases, landlords need to be extra careful to keep their tenants happy.<\/strong><br \/>\nThe most important thing is responding to their needs \u2013 quickly.<br \/>\nDon\u2019t delay small repairs \u2013 accept the cost (which is almost always tax deductible or at least depreciable) and get it fixed.<br \/>\nIf your tenant believes you will look after them, the allure of a slightly better value option down the road won\u2019t be enough to make them move out.<br \/>\n<img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"alignleft\" alt=\"paint renovate decorate design\" src=\"https:\/\/i0.wp.com\/puassets.s3.amazonaws.com\/wp-content\/uploads\/2015\/07\/12319817_s-300x199.jpg?resize=300%2C199\" width=\"300\" height=\"199\" \/><br \/>\nIf your property is going onto the market at a time of increasing supply, do something to make it stand out.<br \/>\nYou need to \u2018wow\u2019 tenants when supply is high.<br \/>\nIf your property looks well-kept, that will take it to the top of the list.<br \/>\nQuality is important to tenants \u2013 remember, this is going to be their home.<br \/>\nFor a few hundred dollars, get professional cleaners in to give the property a really good make-over.<br \/>\nThe tenant departing your property will never do as good a job as professionals.<br \/>\nDon\u2019t forget about the windows either \u2013 sparkling glass makes a huge impact.<br \/>\nIf your walls are a bit grimy, get the place re-painted and replace the carpet if it\u2019s worn down.<br \/>\nThese simple, low-cost measures will have a big impact in attracting tenants.<br \/>\nThe CoreLogic RP Data report included the average annual change in rents over the past 10 years and it\u2019s all good news for landlords.<br \/>\nThese figures just go to show how reliable and safe property is as a long-term vehicle for wealth creation.<\/p>\n<h4>Average annual change in rents over the past 10 years<\/h4>\n<ul>\n<li>Sydney 4.8% pa<\/li>\n<li>Melbourne 3.6% pa<\/li>\n<li>Brisbane 4.1% pa<\/li>\n<li>Perth 5.2% pa<\/li>\n<li>Adelaide 3.2% pa<\/li>\n<li>Canberra 2.9% pa<\/li>\n<li>Darwin 4.6% pa<\/li>\n<li>Hobart 3.1% pa<\/li>\n<\/ul>\n<p>In terms of the importance of rental returns to landlords, of course we all want to receive the maximum yields possible.<br \/>\nWe\u2019re in the game to make money, after all.<br \/>\nBut in the grand scheme of things, I have always seen rental yields as less important than capital gains.<br \/>\nIf you\u2019re looking at buying an investment property, consider the potential for capital gain first.<br \/>\nDon\u2019t go buying a high yielding property that has little potential for growth in value.<br \/>\nIt won\u2019t serve you well in the long run.<br \/>\nThe ideal scenario is to have some blue chip investments in your portfolio that are delivering reliable long-term capital growth; and a couple of cheaper properties that deliver a great yield to help you afford the repayments on the blue chips (which are often negatively geared as high quality properties cost more to buy!).<br \/>\nHere is the state of play in terms of median rental values across the capital cities.<\/p>\n<h4>Median rents across the capital cities<\/h4>\n<ul>\n<li>Sydney\u00a0Houses $610 pw | Apartments $536 pw<\/li>\n<li>Melbourne\u00a0Houses $456 pw | Apartments $404 pw<\/li>\n<li>Brisbane\u00a0Houses $436 pw | Apartments $408 pw<\/li>\n<li>Perth\u00a0Houses $472 pw | Apartments $419 pw<\/li>\n<li>Adelaide\u00a0Houses $373 pw | Apartments $317 pw<\/li>\n<li>Canberra\u00a0Houses $504 pw | Apartments $403 pw<\/li>\n<li>Darwin\u00a0Houses $575 pw | Apartments $459 pw<\/li>\n<li>Hobart\u00a0Houses $343 pw | Apartments $298 pw<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Rental returns are back in the news again, with the weakest growth on record. But it isn&#8217;t necessarily the dire situation it&#8217;s made out to be. In his recent column in\u00a0Switzer, John McGrath gives some great tips on how to best handle periods of weak&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":4644,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13],"tags":[],"class_list":["post-5510","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-story"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What to do in a softening rental market - John McGrath - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/what-to-do-in-a-softening-rental-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What to do in a softening rental market - John McGrath - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Rental returns are back in the news again, with the weakest growth on record. 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