The last few months, a softening rental market has begun to affect investment property in Perth and the surrounding area.
According to a recent article on ABC News, the number of tenants breaking their leases has almost doubled. In addition, vacancies have risen from less than 2% in December of 2012 to a current number of 3.3%. Many are attributing the vacancies to the resource industry’s cost-cutting programs, which are causing many in the industry to lose their jobs.
Here are some market factors.
Low Interest Rates
As the RBA continues its series of rate cuts reducing interest to an all-time low, it is becoming more affordable for first-home buyers to enter the housing market. Most economists feel that the rate cuts will continue, allowing even more renters to become homeowners.
Rents Decreasing in Perth CBD
Increased supply and lowered demand are having a predictable effect: Rents are going down on the CBD. Apartments seem to be the hardest hit, with many apartments sitting vacant for longer periods of time. Many landlords are lowering rents to stimulate occupancy, with some going for as much as $100 less per week than same time last year.
When a Tenant Breaks a Lease
As we mentioned earlier, the number of those breaking leases has doubled from last year. Besides the changes in employment for many, others are now able to afford homes and are breaking leases to move into their own homes.
Fortunately for landlords, the vacating tenant is responsible for the rent until the property is re-let, and also responsible for the expenses incurred by the owner while re-letting the property. Basically, the vacating tenant must pay whatever the landlord doesn’t recover to the end of the lease.
How do I Protect my Rental Income
The first immediate fix we recommend is to try and lock your tenants into long-term leases, in case the market softens further.
Ultimately, though, the best way to protect your rental income is to hire the best property managers in Perth: Investors Edge Real Estate. At Investors Edge, we specialise in buying, selling and managing investment property. It is our mission to always be on top of the market, and help you maximise and protect your investment properties.