As a landlord in New South Wales, you have one opportunity every 12 months to raise your rent – and optimise the yield of your investment property. Setting the rent too high may result in a vacancy, while too low could cost you thousands of dollars in potential income. So how do you strike the right balance?
Understanding current and anticipated market conditions is crucial to avoid missing potential income. At Prudential Real Estate, our analysis indicates that rents will continue to rise over the next 12 months, by around 10%. And here’s why…
The current state of the rental market is largely driven by two factors: increased demand and a lack of supply. With the sudden reopening of borders post-COVID and an influx of immigrants and foreign students, Australia is expected to see a record 400,000 new arrivals this financial year. These arrivals all need somewhere to live and the surge in demand is causing renters to pay higher and higher amounts for the properties of their choice.
However, we’re also facing a serious undersupply of accommodation. The HomeBuilder scheme initially sparked a pandemic construction boom, but surging material costs led to the collapse of many construction firms. As of March, 1,236 companies in the construction sector had gone into liquidation, receivership, or administration. Additionally, mortgage stress levels are at the highest point in a decade. At Prudential Real Estate we anticipate the pressure of rising interest rates and cost of living will prompt some landlords to sell their investment properties, further contributing to the undersupply.
Despite these challenges, the latest CoreLogic Quarterly Rental Review shows promising signs for landlords. Sydney’s median rental price grew 12.6% in the last 12 months, with Q1 gross yields rising to 3.22%. Vacancy rates have also nearly halved, currently sitting at 1.2%.
How to make the most of your annual rent increase
Here are two key strategies to help you take advantage of this opportunity to increase your rental yield, without pushing your tenants to move out.
- Get to know the market: To determine if your rental property is appropriately priced, compare it to similar properties on the market. Consider factors such as the number of bedrooms, bathrooms, living spaces, amenities, location, and condition. By understanding the current rental landscape, you’ll be better equipped to make informed decisions about your rent increase.
- Work with a knowledgeable agent: While online listings can provide some insight into the market, they often only display the best aspects of properties. Partnering with a skilled real estate agent will grant you access to their expertise and market knowledge, as well as their negotiation skills. A good agent will help you price your property effectively to maximise returns and minimise vacancies while also acting as a mediator to ensure both you and your tenants are satisfied.
As a landlord in Sydney, it’s crucial to make the most of your annual rent increase opportunity. By working with a reputable real estate agent and staying informed about the market, you can strike the right balance between maximising your rental yield and maintaining a positive relationship with your tenants.
Prudential Real Estate has been working with landlords to provide accurate and timely advice since 1988 (yes, 35 years!) and would love to help you with your rental property. Call one of our four offices today.
Information referred to in this article was obtained from publicly accessible sources including Core Logic, ABC News, Money Magazine and API Magazine. The information provided in this blog post is for general guidance only and should not be taken as personal advice.
Prudential Real Estate Campbelltown | (02) 4628 0033 | campbelltown@prudential.com.au
Prudential Real Estate Liverpool | (02) 9822 5999 | liverpool@prudential.com.au
Prudential Real Estate Macquarie Fields | (02) 9605 5333 | macquariefields@prudential.com.au
Prudential Real Estate Narellan | (02) 4624 4400 | narellan@prudential.com.au
