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Landlords are finding it harder to jack up rents at will

It seems the property cycle just gets quicker. During the past three or four years weâ??ve had rising rates, rising prices, rising rents, then falling prices, falling rates and now rental growth is expected to taper off and vacancy rates to increase.

Valuation firm Herron Todd White says in its March market review that while the numbers donâ??t yet show this, the marketâ??s demeanour is an indicator.

Landlords have been in the box seat for a long time, but that looks to be shifting. More owners, unable to sell their properties, are putting them into the rental pool, more renters are buying because of lower rates and incentives, while others are returning to sharing accommodation and costs.

"Tenants in some areas are at their limit and are not going to be able to find the ready cash to cover periodic rises in their rent," the HTW review says.

HTW says in Sydney there have already been signs of falling rents, particularly in the prestige markets of the lower north shore and inner eastern suburbs.

The lower and middle brackets remain steady, but the days of 50 or more potential tenants showing up for an inspection appear to be over. At the lower end there are still excellent rental returns, although the number of people moving to home ownership may see rental increases slow.

The rental market, although not as strong as six months ago, is likely to remain relatively steady because historically Sydney has always had population growth from overseas and interstate.

Itâ??s a similar story in Melbourne, where thereâ??s a lot of first-home buyers moving out of rental accommodation, buying house and land packages in emerging estates, affordable inner-city apartments and houses in middle-ring suburbs.

Anecdotal evidence shows that in Southbank (VIC), a traditional hot spot for rental apartments, properties are taking longer to lease, in some cases more than a month. This was unheard of six months ago and suggests rents have peaked.

But again HTW notes there are exceptions. Cosmopolitan suburbs such as Fitzroy, Brunswick and St Kilda still have strong demand, as evidenced by a recent inspection for a three-bedroom Victorian home in Brunswick at which 40 people came through, with some prepared to pay more than the asking rent of $450 a week.

The same thing is happening in Brisbane, where rents have galloped ahead during the past four years. HTW says during that time there has hardly been a lease renewal where rents didnâ??t rise.

But itâ??s changing, because some renters are buying while others are moving into more substantial accommodation so they can share.

HTW says rental demand is still strong for the right location, itâ??s just that premiums above and beyond reasonable are getting harder to achieve.

There will always be demand for good rental properties, but the present economic conditions mean the days of owners simply increasing the rent every review are coming to an end.

 

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