Investors look for an edge in competitive rental market

THE dozens of new apartment buildings being constructed in Melbourne aren’t just reshaping the city’s skyline. The increased supply of new units and apartments is also tipping the rental market in favour of tenants and putting renewed pressure on rent yields and growth.

In the current market, it’s more important than ever that property investors access the latest market intelligence on what tenants want and the most in-demand areas and property types.

Investors also need to carefully consider how their rental properties are managed. In today’s more competitive environment, using a full-service real estate agency that has a skill set in both lettings and real estate sales can deliver the edge that landlords are looking for.

Nelson Alexander increased its properties under management from 7,500 to almost 11,000 in 2013-14. The company achieved this growth by adding one new office to its network in Kew and acquiring existing offices in Moonee Ponds and Heidelberg. Organic growth of its property management business also contributed to this increase.

Nelson Alexander managing director Paul Lunardi says the company is the largest wholly-owned agency group in Victoria. This operational scale – there are now 13 offices in the network and 265 staff – strongly advantages investors who use Nelson Alexander’s team of expert property managers to manage properties, he says.

“The size of the group gives our portfolio managers and people involved in property, market intelligence and knowledge that is right up to date,” Mr Lunardi says.

“Most of our rental properties attract half a dozen applications from tenants. That gives us quality information on what tenants are looking for and what properties have the greatest potential in the market”.

“When we advise new prospective investors, that knowledge allows us to give them good, accurate advice which results in getting their property let sooner. It is market intelligence that really helps us in finding tenants and getting properties on the market very early.”

The vacancy rate for the group’s nearly 11,000 properties under management hovers between 1.8 per cent and 2.5 per cent, considerably lower than the average vacancy rate in Melbourne.

Nelson Alexander has been heavily involved in property management since opening its first office in Brunswick Street, Fitzroy in 1976. The company provides investors with advice on the best-performing areas for one-bedroom flats and two-bedroom units, and can give up-to-the-minute insights into the demand trends affecting period cottages and larger homes.

“We can advise on what works,” Mr Lunardi says. “And because we are a wholly-owned group and not a franchise, all the information and market intelligence we collect is shared across our group”.

“It is not unusual for a prospective tenant to come into our Fitzroy office and see a property available in Northcote and end up renting the Northcote property.”

About 20 per cent of Victorians rent their housing through the private rental market. Over the past two years, three-bedroom and two-bedroom houses in inner Melbourne have been strong rental performers, mainly because they are attractive to both tenants who share and families. Older-style units in good locations are also popular with tenants.

However, Mr Lunardi says as more new apartments come on stream landlords are likely to see little growth in apartment rents. “The supply chain is going to get stronger, which means it will take up all of the demand,” he says. “I don’t see a lot of growth in rentals for units over the next couple of years”. “This means it is going to be more important for clients to have access to tenants, which we provide. The volume of tenant enquiry that Nelson Alexander attracts is staggering.”

He says investor clients also often want an accurate assessment of a property’s value for refinancing or insurance purposes or if they are thinking of selling. “We’ve got the sales side of our business to advise them on current values, current trends and on where the market might be moving, so again that knowledge and intelligence can be vital to investors,” he says. “We can give quality advice on when to renovate, or when to sell.”

By operating as one connected team, Nelson Alexander drives tenants to rental properties across a network spanning east to west across the north of Melbourne. The advantages of the group’s scale are balanced by rigorous ongoing training programs that are focused on keeping service at a personalised level.

Mr Lunardi says investor clients are given an end-of-financial year report, which shows all expenses and outgoings for repairs. “It gives you a net income result that makes tax reporting easy,” he says.