With affordable property prices and rising rental costs driving tenants away from the rental market, one property manager is discounting rents in the hopes of discouraging them from buying.
Jarrad Mahon from Investors Edge Real Estate told Residential Property Manager a softening in the Perth market had led to properties taking longer to lease and more tenants breaking their lease
“There were a number of combined factors causing the softening,” he said. “Rental returns have become really attractive.
“A lot of investors were buying into the market which was bringing in more suppliers and more rental properties, but we had a number of tenants decreasing because jobs were slowing down in our mining sector.
“The other major reason which had reduced tenant numbers and the main reason we were seeing was that are lot of tenants were going and buying their first home to rent themselves.”
According to the latest report from the Real Estate Institute of Western Australia (REIWA), in the three months to July the vacancy rate had grown to 3.6 per cent, the highest since 2010. The overall median Perth rent remained at $475 a week.
Mr Mahon said where it was normal for one or two tenants to break their lease in one month, this had increased to eight to nine tenants over the last month.
As a result, he was now offering discounted rents of $10 to $20 mainly to properties with a rent of $500 or less a week, and where affordability was an issue.
“Where the tenant is overtly sensitive to price or are looking to buy or changing tenancies because of price, we have a discussion with them and negotiate and in some of those cases where the market rents are slower we’re reducing the rental price we’re offering.”
Mr Mahon said a reduction in weekly rents was worth the effort in retaining a tenant due to the cost of releasing a property.
“The landlord is still well ahead if we can keep someone for $10 a week.”
Mr Mahon said he informed landlords by giving them rental data and explaining the reasoning behind the rent discount.
“It’s quite a shock when you got from setting record rent prices to telling them it’s not where it once was. We try to stick with facts.
“We have a bit of a discussion of what it would mean to lose a tenant: the potential vacancy and the cost to release the property.”