What is happening with rental properties in Melbourne during 2022? Take a look at some recent figures and changes in the market.
The rental market fluctuates like anything else and the last couple of years have certainly caused a lot of upheaval.
At the start of COVID, everyone became very nervous about the property market falling. The reverse proved to be true for sales of larger properties as people decided to sit tight and stock of family homes became limited.
On the flip side, the rental market struggled during the pandemic due to a lack of international arrivals, expats from overseas returning to their home country and renters vacating their property after losing their jobs. Vacancies rose and because of this, average rental prices dropped and many rental property providers ended up selling to recoup costs.
Now 2022 is underway, anecdotal evidence suggests up to 15% of properties under management are being sold to owner occupiers. This is great news for homebuyers and selling agents but not so good for anyone who manages a rent roll as it results in a drop in client numbers.
Latest rental property news
In Victoria, as shared by realestate.com.au, “Melbourne tenants are again having to battle it out for a roof over their heads, as competition in the city’s rental market heats up.” After peaking at 18 per cent, inner city vacancy rates have plummeted and renters are again battling it out for properties.
Core Logic reported in April; “Melbourne rent values, which saw a peak-to-trough decline of -4.0% between March and December of 2020, have since recovered to pre-COVID levels and hit new record highs.”
Core Logic also reported an increase in rental yields for Melbourne, although the city retains one of the lowest rental average prices for an Australian capital city, with an average rent of $468 per week.
Competition increases between property managers
While demand for rental properties from renters has increased and yields have risen, so has the competition for properties under management.
If a rent roll forms the bread and butter of your strategy, you need to make the following your priority:
Retaining properties under management
Now is the time to ensure you have positive relationships with your property investor clients. Allocate resources to phone clients and touch base to remind people you care and want to help them.
Create some processes to change the mind of clients who may wish to leave, including negotiating or offering bonus services in order to keep them (be wary of eroding your profits too dramatically with this strategy).
Onboard new clients
Business development is always a priority. Ensure you’re not missing out on any easy wins by offering existing clients an incentive to refer a friend or property owner within the same block.
You may also wish to create incentives such as reduced commission fees for six months in order to attract new properties to your rent roll.
Increase profit margins
One of our recent articles discussed profit margin benchmarks and ideas for increasing profits, including either offering a fixed rate or lowering your commission but charging for additional services like inspections, depending on what youre competition is doing.
With demand increasing, you also have the opportunity to speak with your clients about increasing rent when contracts expire. After two years of low prices, this year is a good time for property management agencies and their clients to recoup losses.
Buy or sell a rent roll in 2022
Given the dramatic ups and downs in market conditions over the last two years, you may be considering either selling your rent roll or taking advantage of the opportunity presented to make a purchase.
Both options have their advantages. The first gives you the potential to free up capital and take your business in a different direction, while the second allows you to rapidly scale the number of properties you have under management.
Regardless of the current market conditions, if your rent roll is in good shape you should be able to sell it for a healthy sum or use it to generate profits for your real estate agency.