How to navigate through a market of rising vacancy and falling rental rates?

SQM Research recently stated “Sydney’s residential property investors have been hit with falling rents and rising vacancies as the country’s largest city suffers an unexpected oversupply of new dwellings.”

As an example, asking rents for two-bedroom units over the last twelve months to September are down 15.2%. An increase in new supply and slowing population growth held the residential vacancy rate at 2.8 per cent, its highest level in 13 years.

We would be daft to think that this is going to change anytime soon, unfortunately we have a basic supply and demand issue.

Property is no different to investing in managed funds, the equity markets etc. Knowledge is powerful and your property manager should be able to provide you the knowledge and service you require. It is your property manager who should be steering your property/asset through these tougher times.

Below are 8 important steps to ensure your property still performs when the market is tough:

1. Do your research! If you are provided with comparables then ensure you spend the time to review, not only is it important to know what others in the building or area have recently rented for it is imperative that you are provided with comparables that are currently for lease. Keep in mind that if your property is coming up for lease it will not be competing with a previous apartment in the complex or house in the street, it will be competing with the current market.

2. Ensure your property manager is carrying out a Pre Vacate inspection, this will allow them to be able to give you any advice on how the property is presented from a re-letting perspective. Further it gives them the opportunity to advise you if there are any minor modifications that can be carried out to assist in achieving the highest rental rate. How your property is presented during the leasing process is crucial. If the tenants do not have the property presented in a presentable manner then this can deter prospective tenants, this also goes for a property that is run down and looking tired.

3. Ensure the campaign is showcasing the property and it’s best features. This is what attracts any prospective tenant and is what will get people through the door! Invest in professional photos, you cannot attract a good quality tenant at premium price with a bad quality campaign.

4. Is your Property Manager flexible and do they work for you? Gone are the days where you could set your mid-week and Saturday open for inspections and hope for the best. Not everyone can work around these timeframes so make sure your Property Manager is also making themselves available for privates inspections.

5. Take the emotion out and treat it like your business. Be willing to price competitively rather than aggressive. What does this mean? A saturated market provides no sense of urgency. When a prospective tenant is spoilt for choice there is no rush in securing a property as they feel there’s a better deal around the corner. It is your Property Manager’s job to create this sense of urgency.

6. Are you being provided with the statistics and feedback from prospective tenants? Is your Property Manager providing you with the amount of advertisement views, inspection numbers, applications received, current vacancy rate in the area etc. If your Property Manager is suggesting a rent reduction, what facts are they providing you? It is all good and well to reduce slightly although be sure that this will create traction, does your Property Manager understand the price brackets and what this means?

7. Lease terms, don’t fear negotiating on terms. Obviously, a Property Manager’s role is to ensure tenant retention along with achieving the best possible return for their landlords. With that being said it can often work in your favour to reduce the timeframe of the lease.  Positioning the expiry of the lease agreement in a more favourable time for reletting and you will find it easier to rent and most likely at a higher rate.

8. Lastly, think commercially. No one likes to receive an email that suggests a rent reduction, although it’s important to look at the end result not the short term. Commercially, by reducing $20-30 per week, which would mean a total loss per annum of $1,560.00, is better than experiencing a further 3-4 weeks vacant.

In summary, a tough market should not steer you away from investing or frighten you in any sense. If you have the correct Property Manager that understands how to structure a marketing strategy, has in depth knowledge of the market and is willing to go the extra mile then you are in good hands. If you don’t, then it’s probably time for a change.


If you have any questions regarding these 8 steps, or would like to discuss Prosper Group’s residential property management service in more detail please contact Shellee Henness.