It is no secret that residential Real Estate continues to boom with demand pushing prices up and supply being low.
Lower interest rates also help and the flow of buyers seeking an affordable buy after being out-priced in the Sydney market continues to push demand. A report by Nila Sweeney this month refers to the real estate boom happening here on the Coast…
“The Central Coast was the first of the regional centres in NSW to rise. It caught the wave from Sydney, and part of the reason is the infrastructure happening there,” says Ryder. “Gosford recorded exceptional growth during the past 12 to 18 months. It just zoomed from nowhere.”
Gosford and Wyong were two of the first suburbs to surge outside of Sydney.
Quoted from Nila Sweeney in this month’s NSW May Market Report 2015.
Not only is the investment property market booming with sales but the rental rates here on the Central Coast have also risen. So this is good news for landlords but it can also mean a lot of tenant moves if rental rises become too much for the tenants.
Core Logic RP Data’s Quarterly Rental Review revealed a huge 7.9 per cent rent rise last year, compared to the national average growth of just 2.6 per cent.
Yes the Central Coast is a great place to have investment property!
Positive for Landlords no doubt but I feel it is worth noting just a few points to consider when rental rates are rising…
A rise in rental rate may result in your current tenants moving out
If your tenant is not prepared to pay a higher rate they may move out. As Property Managers we are proactive in keeping our landlords potential rental rates maximised but we also advise them on the benefits of maintaining good tenants if you have them! After all – if you have good tenants – look after them and they will look after your property!
Protecting yourself as a landlord
A change in tenants means a new tenancy agreement and this is where much of your risk can be reduced by a comprehensive lease agreement that also specifies your rent rate rise preferences. When deciding the tenancy agreement rent rise specifications, consider the market conditions and predictions. If the market rent rates rise like they have been doing on the Coast, ideally you would like the opportunity to raise your rate inline with market trends.
It is also useful to know current legislation with regards to rent rises within agreements so I have included a summary below:
Tenancy Agreement type & Rent Rise Allowance:
Fixed-term agreement: A Rent increase is not permitted during a fixed term agreement unless it was previously written into the lease agreement and clearly set out the amount of increase, when it will take effect and also gives the required notice period from the lease start date. This is negotiated and agreed upon prior to the lease being executed.
Periodic agreement: (where the lease term has expired). The landlord/agent can increase the rent at any time giving the required notice.
With higher rental rates – tenants’ expectations are also on the rise
Tenants are seeking higher quality. Is your rental property up to scratch with the market offerings and tenant expectations? Some maintenance and/or renovations may be in order therefore requiring some additional investment into your property.
Market could switch to decline
If the current under-supply of rental properties continue and if tenants are moving into the buyers’ market and/or out of the area due to being outpriced with market rent rises – the tenant demand could then fall meaning that landlords will be competing with each other on rental rate and this would see prices falling…