Perth landlords lower rents to dissuade potential buyers

Perth landlords are renegotiating leases to stop tenants who are enticed by low interest rates into buying.

There is a softening Perth rental market with more renters breaking leases and a rising vacancy rate.

The Perth metropolitan vacancy rate is at 3.4% for the quarter, according to the Real Estate Institute of WA – up 1.1 percentage points from three months ago.

And in July the REIWA reported one in four residential tenants were breaking leases – up from one in eight last year – which was putting pressure on the rental market.

Many put the increasing rate of break-leases down to loss of jobs in the resource industry. A recent report by Pit Crew Consulting found the resources workforce has contracted by about one-fifth since its peak at the beginning of this year.

But Jarrad Mahon, director of property management and investment firm Investors Edge, says one of the major influences of the softening rental market is lower interest rates which is allowing more renters to become homeowners.

“The breaking leases are mainly in the lower priced rentals under $500 per week. Where in many of those lower end suburbs it is now cheaper to buy than rent,” Mahon says.

In an attempt to keep potential buyers from breaking leases Mahon has been renegotiating leases.

“When negotiating the lease if the tenant is overly sensitive to price and the current rental market value is lower than what we are charging we have reduced the rent to keep the tenant. A $10 reduction over a year is far less costly than re-leasing the property,” he says.

“There is no positive I can see to tenants breaking lease.”