08 Mar 2017

The bell is swinging

 

The bell curve is a-swinging and this year, it's swung hard in favour of tenants.   But where does that leave investors? 

If you’re renting in Brisbane, chances are you’ve had a good year.  Maybe you’ve asked your landlord to fix the airconditioning and they’ve not just fixed it but replaced it – or perhaps you’ve applied for a property, negotiated a hefty discount on the rent … and still been approved.

It seems the days of landlords having the upper hand are, for the foreseeable future, well and truly over.  The steady incline of rental vacancies has been well documented over the course of this year.

Unit vacancies, in particular, have suffered – and Domain Group figures show that the situation has worsened considerably more recently; rental vacancies have more than doubled in some areas in the space of only six months.

In New Farm, the number of vacant units has jumped from 107 in April, to 193 in October, while in South Brisbane the number of vacant units has nearly doubled. The number of units vacant in Nundah rose from 82 to a whopping 182.

Coorparoo recorded the sharpest rise in units sitting vacant during that time, more than doubling from 65 in April to 166 vacancies in October.

So if there are not enough tenants, at what cost does that come to landlords?  The answer is yields, Domain chief economist Andrew Wilson says.

“There’s no doubt we’re going to continue to see a reduction in rents. The high yields that Brisbane investors have enjoyed for so long cannot be sustained,” he says.

The number of vacant units in Brisbane city has jumped from 92 in April, to 171 in October 2016. The median asking rent has dropped from $550 to $500 per week.

It was now standard for rental applications to include not only a demand for a discount to the weekly rent price but also other requests such as short-term leases, air conditioning and ceiling fans.  It’s crazy. Absolutely everyone is negotiating at the moment and landlords are having to listen,.  

Some owners refuse to put the rent down and it’s understandable they’re upset … For some landlords, it’s a bitter pill to swallow.

While new developments are certainly making a difference to supply levels, the other factor is simply less people wanting to rent.  Low interest rates and boosts to the state government grant have reignited the first time buyers market, which means the rental sector inevitably takes a hit.

Not every landlord can afford to take the hit.  As rents continue to plunge, it’s likely to have an effect on apartment sales, 

Investors are nowhere to be seen right now,  with yields going down and vacancy rates going up. Add in the lack of capital gains and the scare-mongering about negative gearing and of course no one is going to be buying.  As the issue unfurls into next year, it will likely mean a serious correction to Brisbane’s apartment market – sales and rentals.  

We talk to people every day and are hearing of investors who are trying to offload apartments they can't afford anymore.  Thats going to start flowing through to some distressed sales.  Looking into next year I suspect that we are going to see a lot of people walking away from their deposits.

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