Surge in new unit supply puts the spotlight on property management

THE supply of rental properties in Melbourne is on a sharp growth trajectory, potentially increasing the pressure on rental returns and ratcheting up the competition levels between landlords.

In an environment in which many new medium – and high – density apartment buildings are coming onto the market, choosing the right property manager becomes critical.

“There are more apartments being released and there’s more rental property on the market than there has been in the past,” says Nelson Alexander Sales Director Arch Staver.

“You are going to need a property manager who is on the front foot and understands the local market”.

“You need a strategy to maximise the positioning and the returns on your property, as opposed to letting your property idle away and compete with everything else on the market.”

The boom in inner-city apartments is continuing at near record-breaking pace, according to the latest data from the Australian Bureau of Statistics.

Some 5093 units were approved for building in Australia’s capital cities last December, which is the second highest monthly total on record behind only the 5970 recorded over the previous July.

December’s results were 10 per cent higher than that recorded over November and just above the 5062 reported over December the previous year.

Australia’s capital cities approved a record 51,106 apartments for construction over 2015 which was an increase of 12,374 or a rise of 32 percent compared to that recorded over 2014.

Melbourne is a leading centre for apartment development, with 33,023 approvals recorded in 2015. Last year, Melbourne unit approvals were 19.7 percent higher compared to approvals in 2014.

The surge in new unit supply is seeing some Melbourne apartments underperform in comparison to houses in the rental market.

Figures from the Fairfax-owned Domain Group show that the annual rent growth in 2015 for houses, at 5.3 per cent, outpaced units, which climbed 2.8 per cent.

The Domain Group has measured metropolitan Melbourne vacancy rates at 1.8 per cent for houses and 3.8 per cent for units.

However, Nelson Alexander’s Fitzroy-based head of property management, Grant Gifford, says inner city rental properties managed by the company have an average vacancy rate of 1.5 per cent, including units, townhouses and houses.

Mr Gifford says this vacancy rate is below the Victorian industry average, and Nelson Alexander’s vacancy rate for properties that rent for less than $500 a week is below 1.5 per cent.

More than 12,000 rental properties are managed by the company, which runs an online booking system that tracks the preferences and spending power of prospective tenants.

“Every tenant who goes through our properties needs to register, so we end up with a database of names, phone numbers and email addresses,” Mr Gifford says.

“When we put up a property for $1,000 a week, our system will match it with prospective tenants, who are looking in that price bracket.”

“We can send an email to a prospective tenant, who may not even be aware of that particular property, but we’ve cross referenced them with the properties they’ve earlier inspected.”

Such advanced systems help keep Nelson Alexander’s vacancy rates at industry-beating levels.

“We’re able to assist tenants who need to move out of one property to another,” Mr Gifford explains. “Therefore the vacancy period for a property is potentially considerably less because you don’t need to go out into the wider market and look for a tenant off the street”.

“And because we manage more than 12,000 properties, we are up to date with market rents. We continually review rents and tenancies on all of our properties as part of the service that we provide to our landlords.”