Rent Increases During Challenging Times
We are currently going through one of the most challenging property market
conditions in more than two decades.
Property investors are navigating ongoing inflated interest rate rises, the need for affordable rental properties is increasing, and tenants are therefore facing rental increases where they are struggling to pay weekly rents without the offset of increased wages.
Both landlords and tenants are being affected by the elevated market conditions. As a managing agent, we are responsible for working with and understanding the financial pressures placed on both parties that are out of everyones control. We understand that property investors need to increase weekly rents to sustain the rise in owning an investment propertys; however, we also need to show compassion to tenants during the rental increase process.
The best way to manage rental increases during challenging times is to focus on the facts (while showing compassion) and communicate in our tenant rental increase notices what we look at when carrying out a rent increase, such as:
• Current market rental prices with the inclusion of similar property rents.
• Supply and demand of tenants versus properties.
• Interest rate increases.
• Council rate increases.
• Increase in the supply of goods and services.
• CPI increases.
• Date of the last rental increase.
• Maintenance or renovations that have been undertaken or requested.
• Tenant feedback during the negotiation process.
As you can appreciate, rental increases are controlled by the supply and demand of tenants and properties. If more rental properties are available compared to tenants, then increasing rents may not be justified. However, if
there is a shortage of rental properties, then rents will generally rise. Stating the facts (as per the above) will demonstrate to tenants that the rental increase is in line with market conditions and not an arbitrary personal decision.
When managing rental increases on your behalf, we must balance the emotions and reactions of the tenant while also maximising your income. When negotiating rents with tenants, we may also need to consider accommodating the tenants recent request for improvements or renovations to the property or negotiate on the initial increase to find a happy medium.
In some situations, it may not be worth losing a quality tenant for an extra $25.00 per week to attract an unknown tenant or if there could be a possible vacancy period of a couple of weeks. During the rental increase process, our agency will discuss your financial situation and the current market rents with you before negotiating with the tenant.
