THE COMING RENTAL BOOM
Sydney has seen a lot of price growth over the past few years, but what about rents? Will we see a rental boom?
Recent data released by Domain shows the harbour city may be on the cusp, with figures already on the rise.
So, what should investors do to make the most of this increase? Nathan Birch, property investor and co-founder of Binvested shares his thoughts below.
PROPERTY PRICES HAVE SURGED IN RECENT YEARS
Anyone with a property in Sydney would know that property prices have gone up spectacularly in recent years.
“In Sydney, between 2005 and 2010, there wasn’t much construction happening,” says Nathan.
Coupled with a growing population, a sharp and growing gap between supply and demand began to emerge.
Prices started going up, and up, and up…
Now, prices are still on the rise despite a surge in construction bringing more housing into the market.
The thing is – the population is still growing.
And, since so many are finding themselves priced out of the market, there has been an increase in the number of renters flocking to apply for whatever properties they can afford.
RENTS HAVE STARTED CLIMBING
Domain group data shows that there has been a 4.8% rent increase in the 12 months leading up to March, 2017. According to Domain, this has been the biggest annual increase in Sydney since March 2011, when rents went up by 6.5%
“Over the next 24 months or so, we will start to see rents rise even higher,” says Nathan.
Already, Blink Property has seen an increase in the renter population with low vacancy’s and rents starting an upward climb, he says.
“Because home prices have risen quite a bit from a sales perspective,” he says, “it has become harder for people to buy a property.”
Nathan expects this growth in demand to “put more pressure prices on from a rental perspective.”
WHEN RENTS ROSE IN 2007 TO 2010
Nathan recalls the rental increase that occurred in Mount Druitt between 2007 to 2010.
Over the course of three or four years, rents went up consistently, from $180 per week to as high as $340 per week, before reaching a plateau.
Now, in 2017, Nathan thinks there will be less activity in the market, as well as a slowdown in construction.
“I think we are going to see some large gains from a rental perspective come through the wash,” he says.
To Sydney landlords, he says, “It is important that you keep your finger on the pulse and push up rents regularly.”
He says, there are a few things investors should do to ensure they make the most out of the next rental boom.
1) Make sure you have a proactive property manager who works for the landlord and not the tenant.
2) Keep informed about comparable rents in your area and make sure what you are charging stays in line with this.
3) Being proactive about what you charge in rent gives you the power to dictate your own pay rise. Charging an extra $10 to $20 a week per property (in a portfolio of 10) means a annual pay rise of $5,000 to $10,000.
4) Your property manager doesn’t have much incentive to get you more rent. A $10 increase may only equate to an extra 50 cents in management fees each week. It is really up to you to make sure you keep rent in line with market value.
“Most people will go and beg to their boss for a 3% pay increase,’ says Nathan.
“Here, you are able to dictate your own pay rise.”
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