How is Redcliffe peninsula going for rentals?

Hi. It is time to discuss increasing the rent on our townhouse at Scarborough. My tenant is paying way under market because he moved in last January (2016) under a break lease situation where the advertised rent was still the same as the previous tenant's lease a long time ago before the upturn in values in SEQ.

He asked me today what i plan charging him along with all the hard luck stories about why he only wants to pay 15 a week more than he is currently paying. My question is does anyone have experience with whether advertised rentals are remaining vacant or dropping from their advertised amounts. The new normal on the Net is around $50 a week more than our current lease for comparables.

I know to "ask an agent' but i want to know if they are sweet-talking us or will they tell the truth. I realise it is usually better to placate and keep a current great tenant than risk a vacancy and all the new costs finding another tenant.

 

@Angel I have a 3 bed high set at Kippa ring, the lease is up for renewel. The pm advised not to raise the rent as their is plenty of decent stock to choose from. She's currently paying $370 per week.

 

I wonder with the influx of investors in the area has to do with the softening of rental market.

 

Rents are generally holding steady in the area, although I dropped one of mine $5 a week when changing tenant.

 

He is currently paying $315 for a 3/2/1 and he baulked at $360 - I am happy to negotiate a bit more. Comparables in the same local suburbs are between $360 to $400 a week. The string of ads he sent me back at around $300 to 340 are at Deception Bay, Kippa Ring and North Lakes, some with only 2 bedrooms or really awful. He is single. I dont want to give him the benefit and then he pull the same stunt next year too. These new complexes and even the trendy Scarb. apartments are quite a long way from our enclave of low density near the water. The new places at North Lakes, KRing and DBay that are so much cheaper are particle board high density. I'll be pointing out their own set of issues, - the constant new construction everywhere nearby, train station, parking and pedestrians so close. My tenant is a shift worker and he loves the peace and quiet where he is now.
We have our lowest price and a two page list of reasons why he wants to stay where he is.

I want to find out if any rents are softening where my place is, not somewhere else ten or fifteen minute's drive away with 200 new apartments in the same street.. Our local advertised rents (all types) are much higher than they were this time last year.

 

Have you considered an increase now, and another after 6 months if offering a 12 month lease? Sometimes two smaller increases is more acceptable than one large jump. Maybe $20 more now, with another $15 in 6 months? May work out better than re-let charges plus vacancy time.

Worry about next year when it happens. Who knows how rental prices or vacancies will go!!
Marg

 

We are getting great results with all our properties in Rothwell/Kippa Ring/Redcliffe and surrounds as vacancy rates are very low and there is great demand for well priced, presentable properties.

I would agree that it's not usually worth turning over a tenant for a small increase, but as @wylie has pointed out, you're losing $2,600 per year if it's genuinely $50 under market...which at $365 per week is just over 7 weeks equivalent vacancy risk to break even. Minus the letting fee, about 6 weeks. I'd be surprised if it took more than a couple of weeks to rent a place out around there so you'd more than likely be in front. Again, it has to be properly priced so it all hinges on your rental appraisal. Personally, I'd probably trust the numbers given the sizeable increased return you're looking at.

- Andrew

 

There is some impact but not in all areas..I have put my Margate rental up by $35 (under rented) and other by $10pw.

 

According to SQM the vacancy rates in Redcliffe are 1.6% but Kippa-Ring have shot up from around 1% beginning of 2016 to currently 4%, would that be accurate or maybe include commercial too?
How's the rental market looking at the moment @Andrew Hancock and others?

 

Kippa Ring is one suburb, inland from the beaches. It has an entire block of new townhouses next to the train station.
There are two Redcliffes - the individual suburb is a distinct location, separate from the name of the general region.

 

My PM advised to only go up by a nominal $5 from $495 in Scarborough. I don't believe SQM's vacancy figures for the postcode - the rental market is definitely not hot from what I can see from a distance and from the PM. I'm planning on a mid-year (as in 6 month) review that was flagged with the tenant, but so far there doesn't seem to be the capacity to increase.

 

What are you basing that on? It's quite a big call to make to suggest they're putting our erroneous data.

 

Here are the current vacancy rates according to SQM;
note the 1.6% - 1.9% VR in the suburbs surrounding Kippa-Ring, but 4% in KR...any idea why that's the case?

 

If you go to re.com.au and search 3,2,1 in Kippa Ring you'll find literally 3 pages of townhouses listed by a company called Joy Realty which looks like a massive development. I would say that's causing the anomaly.

 

Ah yes, that makes sense, thank you!

@Andrew Hancock, do you know how high set 3 BR homes have been renting in Kippa-Ring?
Is there much demand/supply for a newly renovated one in a decent location?

 

No, you're making a classic mistake. I'm saying that I'm not seeing (hearing) evidence that vacancy rates are low. On the other hand, I have no idea the methodology and actuality of SQM's statistical methods and data collection and processing. So of course I can't say they are putting out erroneous data - that would imply I know that something in their method or processes is fraudulent. I have no idea about them, so can't comment.
Are you aware enough of their methodology and systems to state that "the SQM vacancy rate is a perfect representation of the concept of vacancy rate"? This would imply that anyone who disagrees must be wrong.

What I can say, is that the vacancy rate they present (however they get it!) is not reflective of what I have seen and heard on the ground. At the moment SQM says vacancy rates are at 1.6, and that this approximates the 3-4 year average (though that's harder to tell). This doesn't gel with my PM and other agents I have talked with who state that applicants are hard to find and it is dangerous to raise rents.

Now there are a set of possible reasons why this could be so, of which SQM's "erroneous data" isn't even one (ie. we can assume their data reflects their collection strategy):

• Data quality: agents in this particular area that they ask are not telling SQM the whole truth. It doesn't have to be all of them of course. Now this wouldn't mean the SQM data is "erroneous", merely that the methodology is strong enough to cope with failure in quality of the inputs. Data out can only be of quality if the data in is quality.
• Methodology: particular segments of the market are doing very different things. The segments could be location based (e.g. close to Redcliffe vs further away), income based (e.g. closer to Newport vs Prince Edward Pde), house size (e.g. 3br vs 5br), or various other segmentation types. SQM just shows a suburb-level view, not broken down to a segmented view.

etc.


The great thing about any of the data providers like SQM is that they (hopefully!) use the same methodology over time, so relative measurements do tend to make great sense and are useful. But that doesn't mean there is reason to blindly trust their absolute measurements. Think last year when one of the data providers (RP?) changed their method without telling anyone and resulted in the RBA not using them any more.

 

Hi mcarthur,

I'm not quite sure what my 'classic mistake' is, but I'm going to assume it's that I'm trusting the SQM data? A couple of points:

1. What you see/hear on the ground is actually just opinions of agents who run their businesses differently and therefore get different results. Just because an agent is struggling to raise rents or lease a property, does not necessarily mean the market is the reason. If the data is suggesting the vacancy rate is low and you're hearing differently, to me that sounds like a systemic problem with the agent/agency, the landlord not maintaining the property appropriate to the market or any other number of variables that would affect the ability to raise rents. I can tell you first hand that we are experiencing the leasing of properties and raising of rents in line with the SQM vacancy rate figures.

2. Agents in the area don't "tell" SQM what is happening and vacancy rates can't be manipulated by agents. On a simple level, it is the number of vacant properties divided by the number of available properties normally available for rent. I actually do know how SQM calculates their vacancy rates - they monitor all online listings with unique addresses or IDs and exclude those that don't. They then take the total number of established dwellings and multiply that by the percentage of renters in that suburb (another statistic in itself) and then divide the latter by the former. There are flaws in this process as an agent might leave a listing up after it's let, the number of dwellings might change based on development but as far as calculating vacancy rates goes, it it quite comprehensive.

3. No statistic is going to be perfect - that's the nature of statistics. However by comparing a variety of statistics and using that data to make an informed decision, you are more likely going to get a better result than by listing to a few select opinions (whether they are informed or not). What is definitely true, is that the opinions of one or two agents is not going to cover the entire market to the same level of a macro analysis using known data sources. If the data doesn't match what you are hearing/seeing on the ground, then my approach would be to question the reasoning behind that and the variables that might be causing it, not discount the data itself which in my experience with SQM is very reliable.

Of course, people are free to choose who they listen to - whether it be agents ( keep in mind that most of the time PMs do not understand property investing or data function on any level), or the companies whose primary role is putting out statistics directly related to the market conditions that the investor is trying ascertain.

I wouldn't say I'm making a classic mistake. At some point you have to source your information from somewhere and what I'm saying is that I trust the data SQM is putting out more than I trust what one of two PMs are telling me about the market conditions - unless they are literally managing every single property in a given suburb!

- Andrew

 

I had tenants leave during the night and $1000 behind in rent, i have a 3 bed mildly renovated highest and they have found new ones within 4 days of being vacant.
New tenants have signed for 12 months paying $380 per week.