Wednesday, 14th of April 2021
March 28th 2021 will forever be a monumental date to remember in Perth’s property market history as it was the final day of the Residential Tenancies (COVID-19 Response) Act 2020. The Act, otherwise known as the Rental Moratorium, was introduced by the WA Government to protect tenants from rental price increases and evictions during the ongoing financial challenges of the global pandemic.
Whilst the news of the moratorium ending wasn’t welcomed by tenants amidst an ongoing rental crisis, Perth investors are in fact celebrating the fact that they are able to increase their rents for the first time in 12 months.
In a growing market that is buzzing with accelerating demand, local landlords and investors are now considering their next steps. To perhaps assist you in the process we’ve outlined some ways to prepare for this with an overview of strategic planning, comprehensive analysis, innovative strategies and key considerations.
The Market Impact Of The Moratorium
The rental moratorium had a profound effect on Perth's rental market, with vacancy rates plummeting to its lowest rate in 40 years, with demand for rentals increasing faster than supply could keep up, creating a highly competitive rental market for prospective tenants.
Despite the ban on rent increases to existing tenancies, the Perth median weekly rent price increased from $360 in February 2020 to $400 in February 2021 due to vacant properties leasing for more rent than their previous tenants had paid (as pictured below).
REIWA recently published property data showing Perth’s vacancy rate was 0.9% in January, marking the fifth month in a row it had been below one per cent, with WA also listed as the most affordable capital city in the nation to rent in.
With consumer confidence riding high, net migration increasing, high affordability and years of undersupply in the property construction coming to a head, it’s no wonder rental prices will continue their inevitable rise.
Graph courtesy of REIWA.
An Economy On The Rise
Recent data from the International Monetary Fund (IMF) this week reported 4.5% growth to Australia’s economy so far this year, considerably higher than the 3.5% growth projected in January 2021. A positive sign in light of the national economy shrinking 2.4% in 2020 and attributed to various government stimulus and support payments offered throughout last year.
Looking ahead, the IMF released further predictions stating that national unemployment will keep falling from an average of 6% this year down to 5.5% next year. Housing prices are also increasing at their fastest rate in more than 30 years, with interest rates projected to remain at record lows over the next 3 years – clear signs of a recovering economy primed for a profitable 2021.
Closer to home, Perth Now released a recent news story spotlighting the WA State economy as the best in the world, based on its COVID performance over the past 12 months. We’re now starting to see more news stories of this nature, suggesting the timing is perfectly primed for investing in the buoyant Perth market, with articles such as The 10 suburbs to consider investing in once the moratorium ends taking centre stage.
Kristy Copping, PPM’s Director, commented on the local market growth by stating,
“Median weekly rents in Perth have increase by an average of $45 since November 2020 mainly due to the record low vacancy rate and high competition. However we’ve already started to see further increases as a response to the rental moratorium coming to an end.
The suburbs with the most notable increases were East Fremantle (up 5.7%), South Yunderup (up 5.2%), Seville Grove (up 3%), Cloverdale (up 2.7%) and Ballajura (up 2.5%)."
Common Questions From Perth Investors
Since the rental moratorium is no longer in place to prevent evictions and rent increases, we are now starting to see a growing trend from landlords asking what they are entitled to do and what the next steps to take are. We’ve covered off some of the common ones below:
Under a fixed term lease agreement, what rent increases are permitted?
Under a fixed term tenancy agreement, any rent increases during the term of the tenancy would have been agreed to when the lease was signed by all parties. You should refer to the tenancy agreement to determine what has been agreed. Any increases negotiated prior can be implemented now (post deadline date).
***If the fixed term lease agreement does not provide for rent increases, the rent cannot be increased***
How do you make sure my rental returns are being maximised?
The process to ensure your rental returns are being maximised includes the following steps:
- Review your existing lease agreement to ensure you are allowed to increase rents under the existing contract arrangement.
- Conduct a comparative market analysis (CMA) of your property. Using recent transactional data we can determine what your property should be getting in the current market.
- Based on the CMA findings determine what rent you should be achieving.
- Notify your existing tenants of the rent increase through a new lease agreement.
- We encourage you to consider stipulating a 6-month rent review clause for any new lease agreement to ensure you continue to maximise returns moving forward.
What if my tenant decides to vacate as a result of the rent increase?
If your tenants are on a periodic lease agreement they may choose to vacate as a result of the rent increase notice. Don’t stress, if they choose to vacate, they still have to provide you with a minimum of 21 days’ notice. In this time, we can get your property advertised at the new rental price and aim to find new tenants before they vacate the premise. This way your rental returns won't be negatively affected (in fact they will increase with the higher rent amount).
Should I increase my rent during a pandemic?
When you take a look at national weekly rental figures, West Australian tenants are paying a lot less than their interstate counterparts throughout the country. In fact, the recently released Housing Affordability Report found that "WA remained the most affordable place to rent in the country, despite the state experiencing a rental shortage and record low vacancy rates" as reported in this REIWA article.
Landlords should not feel bad for increasing rents. After many years of rental price stagnation, the Perth property market is primed for growth, so its inevitable that rental prices will increase. We encourage you to reach out to your property manager to discuss your options, so you don’t miss out on this opportunity.
Getting Ahead Of The Competition
Now that the Rental Moratorium has ended, it is clear that 2021 is poised for a year of notable rental price growth, so the time is right to align your property with an exceptional agency.
If you’re not getting the service levels you require from your current property management agency, why not work with our award-winning team at Perth Property Management.
Unlike other agencies, property management is all we do, meaning our focus is solely on tailored strategies and customised management to get the most out of your property.
Having been recognised as WA’s leading agency, with the state’s top property manager at the REIWA Excellence Awards, you can feel assured that you’re working with the best in the business.
Your property is too valuable to leave in incapable hands, especially given the predicted market growth, so we welcome you to contact us for a free appraisal to start generating premier returns for your investment property today.
