Rental Increases: The Facts
Rental Increases: The Facts
The current rental market is a hive of activity, and Covid-19, the border closure, the rent and eviction moratorium have all had their impact on the rental market.
With all of this going on, it is important to get the facts and the right advice, both as a Lessor and as a Tenant.
So, let’s dispel some of the common myths and misconceptions around market conditions and rent increases.
Rents are increasing.
On average, in the 6069 area, rents have risen between 15% and 30% from where they were towards the end of 2019 and the first few months of 2020. The 6069-vacancy rate fell to a record low of 0.5% (half a percent) for the month of September, and the Perth Metropolitan Vacancy rate was 0.9% for the same period.
This means there are significantly fewer rental homes on the market now (2,864), than there was this time last year (6151). That’s 3,287 less rental homes on the market today, than this time last year – more than a 53% fall in available rental homes.
Why?
There are many factors that have contributed to this rise in rents and fall in vacancies.
First up, rents are coming off a fairly low base. Many will recall, at the tail end of the mining boom, as construction finished and operation of many mines commenced, the workforce left Perth for other states. This saw a fall in migration to WA and as such, demand for housing fell off the cliff. It wasn’t uncommon for homes to take weeks to rent, and savage reductions in rent to secure a tenant.
WA is now seen as a safe jurisdiction, and it is a great place to live. With the closed border, a lot of residents from the eastern states are considering a move back to WA for work, family or other reasons. WA has also seen a high proportion of Australians returning from Overseas, choosing Perth because we have employment, safety, and a strong health system.
When the borders open again, it is predicted that the net migration into WA will only get greater.
The Covid-19 rental laws, specifically the moratorium on evictions and rental increases until 29 March 2021 have seen a major shift in the market. This change in law has added to the scarcity – investors are starting to sell homes, and there are less investors buying. A tenant cannot be required to vacate a rented premise until 29 March 2021 and rent increases cannot take effect until 29 March 2021.
How much can my rent go up?
The most common myth around a rent increase is that there is some set percentage or amount that they can or can’t rise by. This is not the case.
The act simply states that an increase cannot take effect and sooner than 6 months after the date of the last increase, and you must be given no less than 60 days’ notice of the rent increase.
Sometimes the lease agreement will have a provision for a rental increase to occur part way through a fixed term tenancy, and in this case, the amount of the increase will be specified as either a fixed sum of rent, a fixed increase, by way of CPI (consumer price index) or an amount no greater than x% or $x – when this is the case, the Lessor and Tenant are guided by the lease.
When a lease reverts to periodic then it is very common for the increase to be a “market” increase. That’s exactly what it is. A market increase based on comparable properties in the area. When this occurs, there is no restriction on how much the rent will rise, as long as it is in line with the market, the 6 months between increases, and 60-day notice provisions are observed.
Thanks for reading.
We hope that this is helpful in explaining a little about what’s happening in the rental market at the moment and perhaps why rents are increasing, and why it is a challenge to find a rental.
Feel free to send us a direct message or call our office if you are looking for a new home, have an investment to lease or just looking for some advice.
*Data & Statistics sourced from publicly available and published data from REIWA & SQM Research. The data and projections should be used as a guide only and should not be relied upon in making investment decisions. Rock Ridge Resources Pty Ltd. Trading as Paddington Realty, Licensed Real Estate Agents & Auctioneers. This is not financial advice.
