Advice for landlords and tenants as property rents rise sharply

As renters battle to secure housing, landlords and tenants should both keep calm. Here’s how to treat the current rental rush.

Rents are rising rapidly but many landlords remain shy about asking for more money following a tumultuous 2020.

While it pays to be a landlord as tenants compete desperately for rental housing in many cities and regions, real estate specialists say existing rental relationships should be treated with care.

The latest data from CoreLogic shows property rents rose 6.6 per cent nationally in the past 12 months. All cities have climbed more than 7 per cent apart from Sydney, up 3.2 per cent, and Melbourne, where rents have dropped 1.4 per cent because of last year’s long lockdown.

CoreLogic’s head of research Australia, Eliza Owen, says it’s the biggest lift in rents in more than a decade and has been driven by factors including a rebounding economy, increased government stimulus and a lack of rental supply in some markets.

But the pace of growth is expected to slow.

High demand has pushed up renting costs, but the growth rate should slow soon.

“Very high rental growth is unsustainable while income growth remains subdued,” Owen says.

“The result will likely be more subdued growth rates in the coming quarters, especially as investor participation trends higher, delivering more rental supply.”

During 2020 rents had their first annual fall in 47 years, and just like 2020 property specialists are urging landlords and tenants to keep cool heads.

Real Estate Institute of Australia president Adrian Kelly says supply has been squeezed.

“It’s tenants themselves causing rents to rise because they know there’s a shortage and are offering above the asking rent to secure a property,” he says.

“I’m not seeing large volumes of landlords being super-greedy in the current environment.”

Kelly says rental agents are urging landlords to raise rents “and many landlords are saying no”.

“Good landlords always want the security of good tenants,” he says.

“If they lose a tenant they’re probably going to lose two or three weeks rent when the property remains empty, and extra charges from their agent. That’s money they will never get back.”

Kelly says applying for a property can be like a job interview. “Make sure you superb references when applying for a property, because references are gold,” he says.

It’s tough for people without a rental history, and while some may need to consider a plan B of staying at home with mum and dad, others can supply employer references and personal references.

“Most tenants wanting to get into their very first property completely understand this is their first and only chance,” Kelly says.

“If they do the wrong thing they won’t get another shot.”

Property manager Prue Muirhead says some rents haven’t risen for two years. Picture: Mike Burton

Property manager and investor Prue Muirhead says tenants should be aware of the current market and can check asking rents on websites such as realestate.com.au and rent.com.au.

“Knowledge is power,” she says.

“Be aware that there are costs to an owner when you move out, so these are fees that the owner does not need to pay if you stay renting their property. This could be used as a negotiation tool.

“Nothing is set in concrete, so if you feel that you are being overcharged, say something and provide the examples.”

Muirhead says Covid rental pauses and restrictions meant many properties have not had a rental increase for two years.

“Just last month we had one property that we arranged a lease renewal with a 14 per cent increase, and this was still 5 per cent under the current market for that particular property,” she says.

It is always good for landlords to offer existing tenants rental renewals at least $5 below current market levels, but should not fall too far behind, Muirhead says.

“I have found a simple explanation to the tenant with links to current rentals is enough for them to understand the current jump,” she says.

Landlords should respond quickly to maintenance issues and could also consider adding solar panels to attract and keep tenants, Muirhead says.

MEDIAN RENTS

Sydney $582/week

Melbourne $444

Brisbane $476

Adelaide $430

Perth $472

Hobart $499

Darwin $548

Canberra $620

Regional $441

National $476

Source: CoreLogic