The headlines are frequent: “Vacancy rates tight”, “rental home shortage puts pressure on tenants”. Plenty of property commentators have announced the return of a stronger rental market and skyrocketing weekly rents. Over recent months there’s been huge expectations created amongst landlords, with property developers and other vested interest groups latching onto vacancy data and the limited supply of new rental homes to arrive at incredible forecasts.
One report we saw last week gave a written forecast for a new project’s rents to be 29% higher than we’re currently achieving for comparable apartments. How? Well settlement’s not due til next year and rents are rising quickly. Apparently.
So it comes as something of a surprise to many that rents in most of Brisbane’s inner city are not actually going up.
The Residential Tenancies Authority has just released their March quarter stats and some of these agents and their market commentating/tea-leaf watching/crystal ball gazers should have a good read. Across Brisbane’s inner-city rents in most postcodes have now been flat since June 2011. The reports are correct that supply is constrained – in these same suburbs the rental pool has grown by just 1100 homes in the past year. Hardly the numbers we’d expect to keep up with population growth and a long-term trend to city living.
So how has the supply/demand argument faltered? We’d suggest it’s caution. Caution from landlords who keep reading we’re in tough times and don’t press for rent increases for fear of having a vacant property. Caution from tenants who aren’t upgrading their homes, who are staying put and checking comparable rents carefully anytime their lease is up for renewal.
We’re not economists and can’t offer a more complex reason. But on the ground we see overconfident landlords who over-shoot the market suffering long vacancies – all while reading about this apparent shortage of homes.
We’d argue rents are trending upwards and most tenants do accept this. But when developers and Brisbane real estate agents who have properties to sell are spruiking double-digit growth in rents we’d suggest more caution is needed – from anyone reading their predictions.