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2023 In Review

I won’t go on about how fast 2023 has flown by, we all know it has.

What I want to cover in this 2023 wrap-up is how the rental market and The Management Agency have fared. We all know that the rental and property market generally have been a hot topic throughout the year.

The overarching topic that’s taken over the headlines is the rising cost of living generally but the increase in rents across Sydney has of course been the centre of a lot of discussion throughout the year. We’ve been seeing that since late 2022, rents started increasing as vacancy rates started to decline and this has continued throughout 2023. Rent increases have continued to be significant as have some of the extraordinary rents that have been achieved in the rental market on the back of such an increase in demand. Clearly, a lack of supply has been the contributing factor, and at the same time, demand for quality properties in popular locations has not been this strong since pre-COVID times.

On the other side of the spectrum, we’ve seen consistent increases in Interest Rates which has led to owners needing rent increases that are significant. Other investors have opted to sell their investment properties, leaving the rental market altogether, adding further pressure to supply where tenants are displaced, needing to find alternate rental properties. Of course, some of these properties come back into the supply pool and some are purchased by tenants as well, so while it’s not all negative news there, on the frontline we continue to see a decline in vacancy rates.

I would round 2023 up by saying that rent increases have been significant and overall, the balance between what owners need and what tenants can afford is not always straightforward. The majority of properties are at least back to pre-pandemic rental returns + 5 – 10 % in some cases.

We also see that when rental properties are on the market there certainly are not a lot of prospective tenants trying to negotiate on asking rents. Gone are the days of prospective tenants seeking COVID discounts, their words, not mine. Following the introduction of new legislation in December of 2022, we occasionally still receive offers on applications by prospective tenants, above asking rents. The changes were put in place to ensure that agents and landlords are legally not allowed to entice or encourage offers above advertised rental prices, effectively eliminating silent auctions for rental properties. So whilst we can’t discuss offers above asking rents with prospective tenants, there is nothing to stop the practice of receiving or accepting these higher offers.

When it comes to increasing rent for current tenants, I find that each investor has their own position and objectives when it comes to their property and its tenants so each increase recommendation and action is unique. Importantly when it comes to reviewing rents for properties under our management, our role is to provide information and recommendations to our investors whilst keeping in mind the legal framework and time-based limitations that we must work with, to allow sufficient time to review and issue the appropriate notices. Crucially, opportunities can be easily missed if proper processes are not in place.

Lastly, on the topic of vacancy, while not contributing largely to Sydney vacancy rates we still can see some properties being held unnecessarily vacant where rental prices are unrealistically high. These properties can take 3 – 4 weeks, or more, to lease as the rental prices are slowly reduced to meet the market, my point here is that regardless of the strength of the rental market, tenants do know the market and there are many properties pushing the envelope. It is still crucial to price properties comparatively to prevent periods of vacancy and therefore lost income, and if testing the market at a higher rent then moving to reduce it quickly is key.

With 2024 just around the corner now we’d like to see a more balanced yet continued strong rental market. We also hope that more investors will remain on for the longer term, seeing that some short-term pain can mean long-term gains. Here at The Management Agency, we’re reaching closer and closer to our capacity and while that may call for some longer-term decision-making for now we have room for some new investors. All the same, our number one goal here remains unchanged, to prioritise our current clients, their properties, and tenants.

We hope 2024 is a happy, healthy, and prosperous one.

In the meantime, we’re off on a well-deserved break. Happy New Year, thank you for reading and following along here.

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– Antonio

Director & Property Manager