Saturday, 23rd of December 2023
Preparing Your Rental Property For 2024
As we approach the final days of the year, it’s a great time to pause and reflect on 2023. Throughout the year we continued to see record low vacancy rates, with housing supply struggling to keep up with market demand, rising interest rates and inflation creating some new challenges for investors, and proposed legislation changes to the Residential Tenancy Act also making news headlines.
It’s safe to say it’s been a dynamic year within the Perth rental market.
Whilst a lot of property investors use the festive break to start planning for the new year, we’ve given you a head start by looking at how 2023 finished up, with some key takeaways that we can bring into 2024.
2023 - The Year That Was
Property investors have enjoyed a strong year of growth within the Perth rental market with median rent rising 20% over the past 12 months. Healthy migration levels have led to a surge in population growth which has been the catalyst for upward demand, in turn placing pressure on rental prices – and this is set to continue into 2024.
The year is ending with the vacancy rate hovering around 0.7%, well short of the average of 2.5-3.5% which is typically seen in a balanced market. Further to this, the vacancy rate has been below 1% since August 2022, and the last time we saw a vacancy rate above 2% was in fact May 2020.
The low vacancy rate creates strong demand and subsequent opportunities for healthy rental returns and increasing rental prices. Whilst these financial conditions are projected to continue in 2024, and the market continues to have low stock and high demand, this has created an opportunity for astute investors to crunch their numbers and set their rent at true market value to offset other economic factors such as inflation.
A snapshot of the Perth rental market throughout 2023 – Source: REIWA
The Residential Tenancy Act (RTA) Reform
Another headline of the year was the Residential Tenancy Act reform which includes a series of proposed legislation changes. If you’re not fully across the list of proposed changes, we’ve summarised them below:
- Banning rent bidding
- Limiting rent increases to once a year
- Changes to the dispute resolution process
- Greater freedom for tenants to keep pets and make minor modifications (with increased owner protection).
The Cook Government has recently introduced a Bill to Parliament regarding the planned reforms to the Residential Tenancies Act announced in May 2023. Whilst this does not mean immediate changes, it does indicate the Government is now actively looking at how the reform and proposed regulations will be eventually integrated throughout the industry – you can review the full media release here.
The proposed changes have generated some questions from investors, however, investors should not fear these changes – we discuss this more in our recent article The Residential Tenancy Act Reform: What It Means To Property Investors. Alternatively, you may prefer to review REIWA’s Residential Tenancy Act FAQs to review some of the most popular queries from investors.
The only proposed change that is likely to have the most impact on investors is around rent increases being limited to once per year (as opposed to 2 per year at present), meaning investors will now need to ensure they align their rents according to market value and economic factors to ensure they remain profitable.
Want to forecast a rent rise in line with projected inflation & interest rates?
Our exclusive PPM Rental Market Assessment (RMA) draws upon multiple data points to provide an accurate rental market valuation that helps investors align rents with local demand as well as market, economic and social conditions.
Safeguard your 2024 rental returns and book a Rental Market Assessment today!
Housing Supply – A Work In Progress
One of the highest priority items on the 2024 to-do list for both the WA state and the federal government is addressing the root cause of our current rental crisis issue, 𝐡𝐨𝐮𝐬𝐢𝐧𝐠 𝐬𝐮𝐩𝐩𝐥𝐲.
The National Housing Finance and Investment Corporation announced in early 2023 that Westen Australia was facing a shortfall of 25,200 new properties between 2023 and 2027.
Whilst there are several new housing initiatives underway, these are meeting previous demand rather than future demand, so it’s looking like the housing shortage will take some time to catch up.
During the year to March 2023, WA recorded a 2.8% growth in population (up to 2.855 million) which was the fastest growth rate of any Australian state or territory. Delving deeper, WA saw 73,000 new residents moving into the state during the year to June 2023.
“If you assume there are 2.5 people per household, that’s an additional 30,000 households in that time. However, we are building about 14,000 new homes per year, so we have a significant shortfall in supply versus demand.”
- Cath Hart (REIWA President)
As stated in a recent article on WA’s population surge there are several factors contributing to the slow progress of new housing developments ranging from increasing costs of materials, low building approvals and labour/capacity issues, to infrastructure supply and cost challenges, and even connection to the electricity system.
Staying Ahead Of The Curve In 2024
With several factors looking to take effect on the 2024 rental market, it will be important to align your property investment with the right agency that can help you navigate the dynamic market.
If you have a proactive property manager and rental agency, you’ll likely have already made a start on your planning for the new year. If you’re yet to make a start, now is a good time.
Working with the right agency will ensure you’re not left behind, but finding the right agency can sometimes be a challenge. We’ve put together this handy resource for investors entitled 6 Things to Look For in a Property Manager which may help if you are looking for the perfect fit or in need of a change.
Introducing Perth Property Management
If you’re looking for an award-winning agency with experience and a proven track record of success in the Perth rental market, we’d love to introduce you to our team.
Our team of leasing experts are well versed in navigating the dynamic and competitive market, and aside from our award-winning legacy in the residential space, we also offer commercial property management services for businesses.
Here are some reasons why our owners love working with us:
- Our team has over 35 years real estate experience
- We offer an exclusive client 100% satisfaction guarantee
- Our personalised service ensures our clients are top priority at all times
- We’ve acquired a wide array of industry awards and finalist nominations throughout WA and Australia.
Further to this, our Director, Kristy, was recognised as the 2023 Residential Property Manager Of The Year by the Real Estate Institute of Australia, and is actively involved in delivering her award-winning service for all of our properties.
If you’d like to speak with an experienced agency that can set you up for maximum returns in 2024, we’d love to hear from you!