Landlord's Message - October 2019
We have certainly seen small gradual improvements in the rental market over the last twelve months compared to where the market was, especially if we look back further to two years ago with sliding rents and high vacancy rates. Things have improved.
Rents had bottomed late last year in a number of areas that does vary depending on the location. The old rule of location, location still applies in real estate and probably always will. As we know many investors have been hit in two ways, the first was return that being actual rent returns and the second in equity. So for many who have come into the market in the last five to seven years you may be down in your equity situation unless you bought exceptionally well. Every investors equation is different and the catalyst for those who have sold and made a loss is driven by circumstance, an example their business may have challenges or loss of job making them have to sell to reduce debt. These circumstance sales unfortunately are part of the landscape for investors but on the other hand it does present opportunities for others. I know that sounds a bit cold but is the truth, there is always a zig and a zag in business and in life.
Today there are numerous opportunities for investors with now a more stable leasing environment, reduced interest rates for lending and some excellent value in terms of pricing of properties. This will not last forever and experienced investors know this and are seriously assessing the opportunities out there. Your personal strategy and timeline determines what risk or direction you go. The banks are certainly not giving great returns on deposits and not everyone understands the stock market so many choose a mixed investment portfolio of a combination of both or all. There are many properties now returning four percent plus so there are many cash flow positive properties in the market or close to.
The common question I get is of course when is the next boom. Well I am not sure I will see it again in my time but I know we will see improved and better markets than we have had in recent times. The Western Australian economy has not been kind in recent years. The two main factors to watch are, in my opinion, the employment rate more people employed more money in the economy and the second is population growth. Western Australia’s population growth has been stagnant for some time, more people creates more jobs in terms of services and need more homes to live in etc. It is a huge catalyst.
2020 does look like creating growth in both these areas which will trickle down to all businesses and really we should add Business Confidence which then in turn creates more jobs, increased wages and more competition. Whether it be leasing or selling a home your competition determines pricing. When there is an over-supply prices go down, when there is a shortage it goes up and we are now starting to see some of the lowest figures for some time in terms of properties available for rent and for sale. Tenant and buyers have been spoilt for choice which is slowly changing so this may be a good hint to investors to look at your strategy and see how you can take advantage of this over the next five to ten years. Take advantage of the current lending rates, there are rates out there for less than four percent and in fact I was speaking to a developer who recently secured a rate less than three. Hard to imagine back in the nineties when some of us were borrowing at seventeen percent.
Last month we celebrated our twentieth birthday. It has been a long journey and I would like to thank everyone who have been in some way part of our history. I see some exciting times ahead for all and believe we have come out of probably the darkest part of the market I have seen in my thirty plus years in real estate.
Just a quick note that our office will be open the majority of the Christmas period with the only exception we will be closed on the Friday 27th December and of course the public holidays. Thank you again for entrusting our team to service you and please if you have any questions we are always happy to help the best we can.
Written by Milton Rendell – CEO, Real Estate Plus
