Will Melbourne/Sydney rents increase this year?

My observation with HOUSES in Syd is that vacancies are dropping sharply by the week and asking rents for vacant properties have gone up quite a bit in the last few weeks as well.

I'm tempted to jack up the rents by 5-10% to capitalise on the momentum but not sure if this is advisable for EXISTING tenants. I don't remember a heated rental market in Sydney in the last 10 years so my memory's sketchy.

I know this thread's for Syd/Mel but I'm seeing the same thing happening (if not more acutely) in Brisbane and the GC.

What would you do? If you could theoretically get away with say, 10%, would you do it?

 

Up, up, up they go. That's what you bought them for, isn't it?

I did a post, many years ago now, on SS, when someone was saying that it was penny pinching to put rents up $5per week. I can't for the life of me find it, or remember how it went, and I know it took me a long time to put it together, and at the time, you could put rents up every six months, but the gist of it was this:

You are right. Five dollars isn't much, if you've only got one IP, but consider this. Over a 12 month period, that's $250 (using 50 weeks as it's easier). It's still not huge. But if you could then put it up another five dollars the following year, you've lost $750, much better in your pocked.

Now, let's imagine that you have five properties and you put them ALL up. In the first year, you've lost $1250, but by the second year you've lost $3750.

If you have ten properties, it's $2500 for the first year & $7500 by the second year. See, where I'm going here.

This is only for a five dollar increase, and I know that you're not contemplating $5, but higher. It compounds over time and the number of properties you have. To me, keeping the properties at the current market value is important. Not only will the tenants have to pay market value when/if they leave, because unless they are unhappy living there, there's no incentive to leave, (it costs them money to move), it can also devalue your property if you want to sell.

I have a very recent example of putting up rents to market value & tenant, although very unhappy about it, as had to accept it. I have a NRAS property that has just come out of the NRAS scheme. I've transferred it over to a new PM, and we were going to give notice to the tenant, as the increase in rent is substantial and a lot higher than the supposedly 20% discount that they suggest.

The new PM has discussed this with the tenant, and the reason for the large jump in rent. He's not happy about it, but has looked around and found out that there is a shortage of properties, and no matter what, he is going to have to pay the new amount, and would like to stay on.

AND I've also knocked a decent amount off the purchase price of a property on more than one occasion, where the LL had kept rents low for his 'struggling' tenant. Of course, it was a buyer's market at the time, but none of the prospective purchasers were interested, mainly because the rent was around $50 less pw than similar properties. It didn't matter to me, because I bought with vacant possession & the rental amount moved in line with the other properties in the area.

 

Thanks skater....so you'd have no qualms about jacking up the rent by say $40/$50 (if you could) to one of your 'good' tenants?

 

None whatsoever. The one I posted about is getting $150pw increase.

 

This was an interesting read.

https://www.propertyology.com.au/59-locations-where-rents-will-rise-5000-in-2022/

 

I have put up rents on ALL my properties..they are mainly in Sydney...average rent increase range from $20 to $30 per week...

And none have made any Noise

 

I'm tempted to hike it a bit more to stress test the environment we're in...but I'm chicken tbh.

 

Don't be chicken...i used to be chicken too; until i realise no one cares about my money as much as I SHOULD!

Go for it!

 

Exactly! If you're tenants moved & had to pay another $20pw, they'd find the money. Isn't it better in your pocket than theirs. I mean, you have got a rather expensive asset to maintain for them to enjoy.

 

I haven’t increased rents on any of my Sydney properties. That said, most are in the west and the covid evacuees did not exactly flee to the west e.g Campbelltown. This might change once immigration picks up?

 

"If rents continue to rise faster than housing values, which is a strong possibility in Sydney and Melbourne, yields will continue to improve."

Growth in Australian housing values continues to lose steam as Sydney records first decline in 17 months

 

Just Increased rent on a property I own in Revesby by $60 per week. Tenants didn't baulk at all.

 

I just increased rent on a house by ten dollars ($490 for 3 bed fibro, not a dive but not beautiful). Wont increase on the granny flat ($450, very sleek and modern) as comparables dont show justification at the moment.

Yagoona

 

Hey @Whitecat that gives me some confidence to increase the rent on my fibro place in campbelltown. I always thought cause it’s fibro i shouldn’t but it’s neat and today (although original)

Will check if rents have gone up in the area first. It

 

Rents in Melbourne are the cheapest in the country and in many suburbs have not increased in real terms - or even in absolute $ in many places - for nearly 10 years.

Rent looks cheap and affordable here.

The prospects for rental growth look good over the next year or two , i wouldnt be surprised if Melb residential rents increase by 25% over this period, to catch up.

 

Melbourne’s rental market tightens, with some areas in ‘crisis’

 

Build to rent could cap rents in Melbourne.
Proposed sites have exploded due to the amount of developable land and are not constrained to the cbd.

Last l checked in October - 8000+ units in the pipeline vs only 2000 for Sydney.

Vanilla high yields are probably not something investors should be banking their Melbourne investment strategy on.

 

According to the article on Domain here, vacancy rates are at almost the lowest point recorded - https://www.domain.com.au/research/vacancy-rates-february-2022-1121910/

Hobart and Adelaide are the lowest vacancy rate cities, at 0.2% and 0.3% respectively.

 

Just as well I have nothing in Melb. No doubt some of these developers bought into Melbourne eventually being the most populous city in Oz. Happy for them to play in that patch.

IMHO, 2% vacancy is a balanced market, 1.5% is when there's some urgency and rents can go up $5-20 pw. The moment we get down to 1%, that's when you wish you were a landlord. Goodness knows we've been waiting a long time and bending over backwards for tenants.

Looking forward to Syd hitting 1% (or below) soon. Adelaide and Brissy are already there. Let's get some migrants in stat!

 

Upped one property by 50pw in Melbourne and another in Brisbane by 50pw, both recently. An apartment I own is languishing in the depths of hell