As falling property prices and weaker sales volumes put pressure on agency commissions, real estate businesses are increasingly turning to rent roll acquisitions to diversify their income, with one industry veteran predicting further competition for established portfolios.
Australia’s property downturn is reshaping the economics of real estate agencies, with established rent rolls emerging as increasingly valuable assets in a challenging sales market.
It came after Cotality’s recent data showed that capital city values fell 8.1 per cent in seven months, the fastest decline in the past 40 years.
Honeycombe Agency Services head and former Real Estate Institute of Queensland (REIQ) chairman, Rob Honeycombe, said since the budget, the number of agencies seeking to buy rent rolls to make up for falling sales commissions had soared.
“Wherever you are in Australia, a well-run rent roll is the steadiest income in the business,” he said.
High rents and tight vacancies boost rent-roll income
While the federal tax changes have prompted some investors to pull back from the market, Honeycombe argued that tight rental supply and higher rents had created favourable conditions for rent rolls to deliver high income.
He said rents were currently at a record high, with the national median reaching $713 per week, while Cotality projects vacancy to remain below average over the coming year.
“The budget has hurt values and sale numbers, but it’s also choking off new rental supply at a time when vacancy is already tight,” Honeycombe said.
“Rents may be close to what tenants can afford, but they’re set to stay solidly high, and with vacancies this tight, properties stay occupied. High rents and full occupancy are exactly what keep a rent roll’s income strong,” he said.
He said management fees per property were soaring on the back of elevated rents, delivering steady income for agencies.
According to Honeycombe, buying a rent roll could provide agencies with an immediate cash flow boost, particularly where they could add properties without significantly increasing overheads.
“Buying a rent roll is an immediate cash flow injection. If you can add properties without adding staff or office space, much of that new income goes straight to the bottom line.”
The window of opportunity
Honeycombe said that the next six months would be crucial to securing a rent roll, with sales volumes staying under pressure and market conditions set to remain subdued heading into 2027.
He said organic growth was increasingly more difficult, with the recent tax changes slowing new investor activity, causing rent roll acquisitions to be the fastest way to grow.
“Agencies in many parts of Queensland are also expanding aggressively and will compete hard for rent rolls,” Honeycombe said.
“For a principal planning to retire or simply change direction in their real estate career, that’s a very good position to sell from.”
Honeycombe also predicted that the rental sector would continue to remain strong, rejecting the idea that the tax changes would shrink the landlord base over the long term.
“I’ve seen people call the death of property many times over the past few decades. A third of Australians need a rental home, and there’s no real plan to replace private landlords.
“Those landlords need an agent to manage their properties and navigate increasingly complex tenancy laws. Rent rolls have a long, secure future.”
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