Rental growth might be slowing down but it’s not going backwards: John McGrath

Real estate agent John McGrath has given his tips on what property investors should do in a softening rental market, adding the current market situation is great news for renters.

In an opinion piece for Peter Switzer's Switzer Daily, McGrath said rental growth might be slowing down but it’s not going backwards, so many landlords won’t be in a position where they have to reduce rents, they’ll just have to keep them at the same level for a while. 

He wrote that more properties available for rent means more options for a growing community of renters – especially Gen Y Australians, many of whom have resigned themselves to a life of renting in expensive cities like Sydney. 

"When supply increases, landlords need to be extra careful to keep their tenants happy. The most important thing is responding to their needs – quickly. Don’t delay small repairs – accept the cost (which is almost always tax deductible or at least depreciable) and get it fixed. If your tenant believes you will look after them, the allure of a slightly better value option down the road won’t be enough to make them move out," McGrath said.

"If your property is going onto the market at a time of increasing supply, do something to make it stand out. You need to ‘wow’ tenants when supply is high. If your property looks well-kept, that will take it to the top of the list. Quality is important to tenants – remember, this is going to be their home.

"In terms of the importance of rental returns to landlords, of course we all want to receive the maximum yields possible. We’re in the game to make money, after all. But in the grand scheme of things, I have always seen rental yields as less important than capital gains. If you’re looking at buying an investment property, consider the potential for capital gain first. Don’t go buying a high yielding property that has little potential for growth in value. It won’t serve you well in the long run."

He added the ideal scenario is to have some blue chip investments in your portfolio that are delivering reliable long-term capital growth; and a couple of cheaper properties that deliver a great yield to help you afford the repayments on the blue chips (which are often negatively geared as high quality properties cost more to buy!). 

Rents across capital cities.

Median rents across the capital cities 

• Sydney Houses $610 pw | Apartments $536 pw
• Melbourne Houses $456 pw | Apartments $404 pw
• Brisbane Houses $436 pw | Apartments $408 pw
• Perth Houses $472 pw | Apartments $419 pw
• Adelaide Houses $373 pw | Apartments $317 pw
• Canberra Houses $504 pw | Apartments $403 pw
• Darwin Houses $575 pw | Apartments $459 pw
• Hobart Houses $343 pw | Apartments $298 pw

To view the original article on the Switzer Daily, click here.