Remember Rent Increases? They're Making a Comeback in 2019!
Can’t fight market trends! With vacancy rates decreasing and the local rental market clearly gaining momentum over the last few months, we’ve already begun to see rent increases and are preparing for this to become a market trend. Whether you’re a landlord or tenant, rent increases will most likely aeffect you and your tenancy in the near future. It’s a good idea to brush up on the legislation and the law behind this, to know exactly what the Residential Tenancies and Rooming Accommodation Act legislates around rent increases.
THE PAST | THE MINING DOWNTURN FLOW ON EFFECT… JUST CALL IT A MINOR SETBACK! Imagine it’s 2013 for a brief moment. I’m not talking about eating FroYo and listening to Lorde, let’s focus on the rental market in Rockhampton. After a number of very strong years where the vacancy rates were less than 1% and rents were at an all-time high, mining in the Gladstone, Blackwater and Mackay regions began to slow or shut down. Rockhampton saw a spike in unemployment, and the rental market started to see more and more vacant properties as tenants pursued employment opportunities elsewhere. This meant that our local property managers and market observers were seeing rents decreasing, and for most, including myself, this was a new experience! Prior to this, rent decreases were usually only ever given as an incentive or a thank you to outstanding, long term tenants from appreciative landlords. The mining downturn had a detrimental effect on those direct mining regions at the time, and although Rockhampton has never been about boom and bust, we definitely took a hit to our confidence. So much so that our vacancy rates gradually rose, and that was the end of rent increases. Well… Until now!
AND ALONG CAME 2018 The Rockhampton rental market vacancy rates have been decreasing steadily over the past three to four years. Most recently, 2018 spent the first six months at a very healthy 3-4% vacancy, finishing the year at a consistently low 2% vacancy. This rate has flowed onto the consistent rate for 2019 to date. Our agency can now report this strength in the market is resulting in rent increases at lease renewals. We’ve noticed a trend of prospective tenants moving into the Rockhampton area for employment opportunities, with a large number of these being construction and the building industry, health care professionals and education. These big rocks in employment opportunities is a clear sign of growth and activity, which is a great indication of what’s to come for our region.
DID YOU KNOW? With mining on the rise again in regional areas, the Mackay and surrounds rental market is the first to completely bounce back, reporting no or 1% vacancies and strength in their market.
The pressure these low vacancy rates are putting on the Rockhampton rental market is already having an effect on rent increases at lease renewals, so you’ll need to know the legislative requirements when it comes to rent increases.
THE FIXED TERM AGREEMENT | TENANCY AGREEMENTS WITH AN END DATE As it sounds, a fixed term agreement is an agreement for a fixed term. Any rent increases during this time must be outlined for the entire term at the time of all parties signing. The increased amount and the date of the increase must be outlined correctly on the Tenancy Agreement, and it must be at least six months since the start of the agreement or the last rent increase occurred. The tenant must also be given at least two months’ notice in writing on the increase occurring closer to the time.
THE PERIODIC AGREEMENT | TENANCY AGREEMENTS WITH NO FIXED END DATE If warranted by the market, rent can still be increased when tenants are on a periodic agreement. The tenant must be given at least two months’ notice in writing, and again, keep in mind it must be at least six months since the start of the agreement or the last rent increase occurred.
NEGOTIATING A NEW TENANCY AGREEMENT All parties can negotiate a new lease either at the end of the last agreement or during a periodic agreement at any time. Again keep in mind that for a rent increase to take place, it must be at least six months since the last increase. No notice period is required for a rent increase fixed term to fixed term.
AND IN TURN, INCREASING THE BOND It’s best practice to work with a bond equal to 4x the weekly rent. For example, if the rent is $350 per week, the bond held should be equal to $1,400. Having said this though, the bond may only be increased if it has been at least 11 months since the start of the agreement or the last bond increase occurred. By law, all tenancy bonds are held with the Residential Tenancies Authority.
SELLING A RENTAL PROPERTY WITH A FIXED TERM AGREEMENT On a side note, the tenancy agreement will always stand when a property changes hands. In most cases, the tenancy will continue as per the current terms until the lease end date, when the lease is renewed, or the tenant is issued notice to vacate with the appropriate notice period. As the tenancy agreement is the same, the rent will not change unless already written into the agreement in accordance with legislative requirements.
THE FACTS ON RENT INCREASES | HARD FACTS FIRST HAND Click here for the information straight from the RTA website:
THINKING OF STARTING AN INVESTMENT PROPERTY PORTFOLIO?
If you’re a prospective landlord and you’re still reading because you’re thinking of buying your first investment to start your own property portfolio, please contact me for a chat – I work with new investors daily and I’d love to give you a rental guide on any property across the market that you might be looking at purchasing as an investment. I have new and current landlords contact me regularly with their ideas so you’re not alone! On the other end of the scale, if you’re already a current landlord and you’ve recently signed a lease renewal without a rent increase, it may be time to review your options. Let’s chat about how we might be able to help you get the best out of your investment.