Landlords have been urged to be meticulous in the way they manage residential tenancy leases as Victoria’s COVID-19 restrictions ease.
Nelson Alexander’s Head of Property Management Martin Sizer says carefully managing lease activity – especially, lease periods offered to prospective tenants – will be the driving factor determining which landlords quickly bounce back from the pandemic.
The company’s team of professional property managers are focused on striking and planning for new leases that will best serve the interests of the owners of the more than 16,000 rental properties managed by Nelson Alexander.
“Leasing activity is going to be front of mind for landlords and agents as coronavirus restrictions ease and we get past the Stage 4 restrictions,” Mr Sizer says. “There is no doubt that matching suitable tenants to landlords’ properties will dominate our workload in the months ahead.”
The peak leasing season in Melbourne is February-March, and in a normal market, Nelson Alexander typically offers most tenants a standard 12-month lease.
That’s yesterday’s thinking in a coronavirus-influenced market. Increasingly, Nelson Alexander property managers are working with owners to offer tenants six-month and 18-month leases. The aim is to help boost returns to landlords and reduce vacancy rates.
Mr Sizer says with the COVID-19 restrictions, and especially with the Stage 4 restrictions, agents have not been able to lease properties until they become vacant.
The Stage 4 restrictions have put a stop to would-be tenants physically inspecting properties, although they can virtually inspect homes through the many “video walk-throughs” being offered online by Nelson Alexander.
Even under the less stringent Stage 3 restrictions, potential tenants cannot physically inspect a property that is coming up for rent if there is an objection to this from an existing tenant currently in the property.
These factors have worked to push up vacancy rates and to reduce rental prices in some areas.
Mr Sizer says “smart approaches” to leasing and the use of an experienced property manager with deep knowledge of the rental markets in particular areas, will drive success in the current climate.
“We’re asking landlords, ‘Do you want to consider a shorter lease – say, a six-month lease – or maybe a longer one, such as an 18-month lease?’” he says.
“The key is to stagger when the lease ends.
“The peak leasing season is February-March. If we had someone signing a lease now, we might suggest a six-month lease because then, when that lease ends, the landlord should have a large pool of tenants to draw from.”
Nelson Alexander’s data, as well as data from analyst groups such as CoreLogic and Domain, shows that supply is outstripping demand in certain areas. As a result, rental prices have dropped.
“A property that may have been leased for $700 a week may not be able to lease for that price right now,” Mr Sizer says.
“We may have to ask for $600 to get that property leased now.
“The landlord may be banking on $700 a week to pay their mortgage. What we might suggest in this situation is to lease the property for six months at $600 a week to get it filled. In the New Year, when hopefully things have settled down and it is peak leasing time, the rent can go back up to $700 a week.
“Lease periods are absolutely going to be a discussion point between landlords and agents as we move forward.”
The latest data from the Real Estate Institute of Victoria confirms that vacancy rates are stretching out in Melbourne
The REIV says rental homes are “now more accessible” in Melbourne, with vacancy rates in June across the city relaxing to 3.0 per cent.
According to the institute, the Melbourne median rental price for houses is now at $473 per week, while the median rents for metropolitan units was $420 per week for June.
The relaxation of vacancy rates can be largely attributed to inner-city areas as smaller properties move from short-term, Airbnb-style rentals to become permanent rentals. The decline in the number of visitors and international students coming to Melbourne has meant that more property owners are returning to the traditional rental market.
Meanwhile, the Victorian Government has moved to increase income support for qualifying landlords.
The changes mean that landlords who had received $2000 assistance packages from Consumer Affairs Victoria can now apply for an additional $1000 in assistance.
Mr Sizer says Nelson Alexander is offering tenants a wide range of video walk-throughs of properties.
The company was also looking closely at its property management workforce and structures in order to drive efficiencies with the management of lease activity and interactions with landlords once Stage 4 restrictions end.
“That will be the major focus. We have tenants on our 45,000-client-strong database who want to view properties. They expressed interest, so as soon at the doors open there are certain properties that will get leased overnight. They will be snapped up because there are lots of tenants chomping at the bit.”