Wednesday, April 19, 2017

Landlords, you are the beneficiary of a strong sales market

The sales market has remained strong over the first quarter of this year. We've seen properties sell well-over their reserve price at auction, buyers putting in quality offers after first open inspections, and property sales creating new 'million dollar suburbs'.

Often when the sales market is running hot and confidence is high, the rental market slows, and vice-versa. However, it's been very interesting to see that during the current cycle, this hasn't been the case... Landlords have been a beneficiary of the strong sales market.

Let me explain.

Many people have been successful in selling their home, but when the shoe is on the other foot and they are looking to buy, they have found the market to be very competitive. As a result, many buyers have entered the rental market as a 'stop-gap' between homes, tipping the demand from the sales market into the rental market.

At Toop&Toop we like talking in facts and figures. We record the number of tenants that attend our open inspections live on iPads, so we can produce instant reports from the field to our Landlords.

So what are the numbers saying? Our team have seen a 45% increase in tenants attending our open inspections over the past quarter (Q4 2016 to Q1 2017).

Adding to the strong conditions, we have also seen very low stock levels on the rental market. Our vacancy rate was at a record low level of 0.29% in metropolitan Adelaide last week (compared to the industry average of approx. 1.7-2.0%). This is a staggering number and is the sign of a very tight market.

Currently our property management team have almost half the number of properties available for rent than we did 6 months ago. We are finding that many tenants are choosing to renew their lease, rather than looking elsewhere to rent as there is simply a limited number of homes available. How long will it last? With a number of residential developments in the pipeline, the conditions we are seeing right now will likely ease over the next 12-18 months as additional supply enters the market. We believe the metropolitan Adelaide market will however, remain a steady performer in the long-term - as a result of the underlying affordability of property in our state compared to other capital cities.

At Toop&Toop we're excited about investing in Adelaide. We see our role as agents is to be proactive to ensure landlords can make the most of the market conditions throughout the property cycle and optimise their returns.

Suzannah Toop

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