The Market Is Pumping (PUT THE RENT UP!!!!)

Contributed By: Nick Buick on

Editor: This article is discussing the South East Queensland rental market, in particular. Market conditions in other regions may differ.

The rental market is PUMPING right now. I know this because my managers are complaining to me they’re getting too many enquiries to keep up. Prospective tenants are complaining to me no one is returning their calls or emails (again, because managers claim they don’t have time to do so).

For the first time in our agency’s history, we’re struggling to meet our contractual obligation with RealEstate.com.au for rental upgrades. We normally hit our quarterly rental upgrade obligations within the first 2 weeks of the quarter. No managers are bothering to upgrade marketing because they can’t keep up with the demand as it is. This is a great health indicator for the market – but it also paints a different story to me – that managers are failing to capture additional income for themselves and their owners:

NOW IS THE TIME TO PUT THE RENT UP!!!! Put the rent WAAAAY up. One of my own managers contacted me recently as our tenant was moving out, and advised that we should drop the rent to find a new tenant quickly. After shaking my head in dismay, I told them that no… we put the rent UP now – she begrudgingly followed my instruction and put the rent up by $15 a week (3%) and we had a signed lease within 48 hours. We should have put the rent up significantly more, probably closer to 10%. But I’m very glad we didn’t drop it.

When managers tell me they’re getting swamped with applications and enquiries such that they cannot even respond to all of them, it signals to me (as it should to any business operator) that there is a significant undersupply and demand is at a peak. Under such circumstances, price should be adjusted to reach an equilibrium. In simple terms: PUT THE RENT UP!

I find it perplexing that when met with such conditions, managers are choosing instead to ‘save money’ on marketing. It reminds me of the early days when managers would tell me “I don’t need to advertise, I have a sign out the front”. Under normal conditions, a feature listing will attract a tenant in 7 days, as opposed to a standard listing which takes a month. Currently, these timeframes are both significantly shorter.

The data paints a similar story to my anecdotal experiences. According to the Rental Demand Reporting Tool (available to all our managers from the control panel under Data Bases). Demand has increased by a massive 45% in the past 12 months in Newstead, for example. Despite this, the average rental asking price has only increased by 5%:

Demand has significantly outstripped price in the sample area of Newstead

In a well maintained market, rents would be increased significantly higher to keep in step with the increased demand. When met with a significant increase in demand, the correct and appropriate course of action is *not* to cease marketing. The correct course of action is to increase your pricing in order to profit from such conditions and continue, or even increase marketing expenditure, to synergise with these conditions and grow your income as well as that of your investors. In so doing, you will also gain their loyalty and trust by attaining better returns for them on their investments and exceeding their expectations.

3 Comments

  1. Hi Nick, You should be aware that your article is national. So to say the market is pumping is inaccurate. I am in Sydney (Hornsby) where we have an oversupply of new buildings. In my postcode a quick check on Real Estate shows 132 two bedroom apartments for rent. With %80 of our market coming from overseas & interstate, our rents have continued to drop, in my building about $80 p/wk. Rgds David

    1. Author

      My apologies David you are absolutely right – this article is relating to Queensland where the bulk of our managers are operating from. It frustrates me no end when analysts use Sydney to speak for the entire Australian market without acknowledging Australia’s housing market is broad and multifaceted and I have just committed the exact same sin here myself. I will clarify above :).

  2. With this high demand, there is not that need to advertise on realestate.com and pay the extra fee they have forced on all of us. It is time to do something to this monopoly. Time for us to work together. Stop advertising on Real-estate. All we need is an awareness amongst tenants (and property buyers) that there are properties available on other portals that are not on realestate.com.

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