Despite some doom sayers, I see little evidence of any downturn in house prices or demand. However, I do see some niggling uncertainty ahead for landlords as we head toward an end-of-year surge in new off-the-plan apartments. As investors already know, this time of year is a merry-go-round of tenant movements anyway, without the added impact of a several hundred brand new apartments hitting the rental markets.
Unfortunately, on settlement, many of the owners of these new apartments might find their bank valuations could come up a bit short. This will force these, often inexperienced, investors to stump up considerable extra money and further squeeze their finances. With this additional financial pressure, they will not be able to risk having an empty apartment, even for a week or two. Many will need to lock in a tenant as soon as possible and secure an income stream to meet their repayments. The fastest way to do this is, in a market full of several hundred similar properties, is to heavily discount.
We also expect the overall vacancy rate to rise from the surge of new apartments and put further downward pressure on most rents. For that reason, we suggest investors who are facing a rent review or renewal at this time of year to consider delaying any review by several months until the market settles down. Better to keep your sitting tenant happy than risk a vacancy during this upcoming re-letting period.
Until next week,