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Brisbane landlords warned to rethink rent hikes despite ‘healthy’ market

By Bianca Dabu
13 April 2021 | 1 minute read
Brisbane

Brisbane is experiencing one of the tightest rental markets in a decade on the back of high demand coupled with extremely low supply, a new report has revealed.

Post-pandemic, Brisbane’s rental markets are experiencing a tightening of supply, with vacancy rates currently sitting at 1.8 per cent, new data from Atlas’ inaugural market insights report has revealed.

According to LJ Hooker’s head of property management, Stepfanie Regan, for Queensland, the tightening trend has primarily been driven by a spike in migration in 2020, with interstate migration at 90 per cent above the decade average.

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“As long as this continues, we are likely to see an influx of new demand for rental properties,” Ms Regan said.

“In recent memory, there has been no evidence of a property market so tight. We are experiencing huge demand for rental properties, with up to 87 tenant applications on a single property, and this is likely to continue to increase through the year.”

Ms Regan explained that another contributing factor is that many investors are cashing in on their excellent capital gains by selling the properties and mostly to owner-occupiers.

As a result, rental returns and yields have significantly increased in Brisbane, with rents soaring from 5 per cent to 15 per cent.

Further, gross rental yields sit at 4 per cent for houses and 5.2 per cent for units — much higher than other capital cities such as Sydney and Melbourne.

With a healthy rental market, landlords are naturally becoming keen to increase rents, but Ms Regan warned them of the dangers of losing a good tenant.

According to her, many tenants are currently under a lot of stress, as affordability continues to decrease rapidly.

“Many investors rely on rent as their only source of income, so are, of course, very keen to increase rent. Experienced property managers are trying to encourage an increase of rent in accordance with the market value but are advising landlords not to raise prices too high, especially if the tenants have been good,” she said.

“Rental returns are definitely increasing, but I would warn landlords against hiking up prices if they have current tenants who are respectful of their property.”

Instead of raising prices immediately, Ms Regan advised investors to negotiate a reasonable rent increase with good, long-term tenants.

“You can increase your returns in good conscience and keep your current tenants,” she highlighted.

“Speak to your property manager when it is time for your lease to be renewed and see if there is room to warrant an increase on your property. They can advise you on the best next step.”

Looking ahead, Ms Regan expects the positive trends in the Brisbane rental market to continue, with returns increasing even further throughout 2021.

Brisbane landlords warned to rethink rent hikes despite ‘healthy’ market
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