15/04/2010 - 00:00

Competition tight for city tenants

15/04/2010 - 00:00

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INNER-CITY apartment owners have been forced to cut rents and improve dwelling presentation in order to attract tenants in a competitive market.

Competition tight for city tenants

INNER-CITY apartment owners have been forced to cut rents and improve dwelling presentation in order to attract tenants in a competitive market.

Anecdotal evidence from a number of private landlords indicated owners are facing lengthy delays in finding tenants for inner-city apartments.

According to one private landlord, who declined to be named, the combination of delays in finding tenants and recent interest rate increases by the Reserve Bank was causing considerable financial pain.

The landlord said it took eight weeks to find a suitable tenant for a fully furnished inner-city apartment with parking.

A Real Estate Institute of Western Australia survey of 1,400 rental properties held by four separate inner-city estate agents showed a vacancy rate of 4.1 per cent.

In normal market conditions the vacancy rate for rental properties in metropolitan Perth has traditionally been around 3 per cent.

Realmark Real Estate director John Percudani said the exit from the rental market by first homebuyers had contributed to the increased vacancy rates.

Realmark recently reviewed its inner-city apartment rental pricing and presentation in response to a shift in market dynamics.

As a result of the review, Mr Percudani said the average days on market for Realmark inner-city apartments had decreased from between 30 and 35 days, to 15-21 days.

According to Mr Percudani, private investors may have had issues finding tenants because they weren’t attuned to shifts in the market and were unwilling to improve presentation or alter price points.

“A lot of first-time investors, and there have been a lot of them sucked into that CBD market with the purchasing of apartments, they’re probably not as in tune with what you need to do to adjust to market situations,” Mr Percudani said.

“The rental market does shift very dramatically from week to week, month to month, and unfortunately they often hold onto their price without realising that every week that goes past costs them a lot of money.

“They tend to take the market curve down, rather than get ahead of the curve.”

In contrast, MLG Realty’s general manager, David McManus, said his firm did not currently have enough inner-city apartment stock to satisfy demand.

Mr McManus said his firm had several requests for multiple dwellings by corporate clients that had boosted demand.

On the supply side, the Property Council of Australia’s multi-unit development survey, released last June, identified a potential shortage of new apartments beyond 2012.

At the time of the survey there were 1,658 apartments under construction, 518 actively being marketed and 692 apartments that had development approval but were not being marketed.

According to the survey, the strong population growth expected in the CBD and shortage of new apartments in the development pipeline would drive up rents and apartment sales values.

The main players currently supplying new apartments in the CBD are Diploma and Finbar.

Diploma announced early this week it would build its fourth high-rise apartment building on Adelaide Terrace, taking the total number of Diploma-built city residential projects to seven.

Finbar is currently developing the 27-storey Fairlanes and the 24-storey Times Two apartment complexes on Adelaide Terrace, and has secured development approval for a 44,000 square metre mixed-use apartment and office block at the former ABC studio site, also on Adelaide Terrace.

Finbar has also proposed a 31-apartment boutique apartment complex at 22 Plain Street.

 

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