Raising The Rent - March 2023
March 21, 2023 / Written by Rich Harvey
By Guest Blogers Gina Li & Adam Nobel, Property Management Expert, Hugo Alexander
Rental prices rose nationally just over 10% in 2022 according to CoreLogic data. In most areas of Australia vacancy rates are extremely low, and as a result putting pressure on rents. With a lack of rental stock, higher yields are enticing property investors back into the market. Let’s take a quick look at the way property investors should consider rent increases.
When should you consider raising the rent?
If you are a landlord, it is beneficial to review your rent sixty days prior to an upcoming lease renewal. This time presents an opportunity to seek a higher rental yield. It’s also a great time for your property manager to discuss with you any future maintenance plans or upgrades to the property.
What factors do you need to consider before increasing the rent for your property?
It is important that all parties are conscious of the rising costs of living, this includes increased interest rates for our landlords. In Southeast QLD we are experiencing a rental availability crisis and a rental affordability crisis. Market conditions are portraying rental demands to be extremely strong and tenants are almost certain and expecting an increase for their next rent assessment. It’s unfortunately a stressful period for all.
If a rent increase is given to the tenants and they perceive it as being too high, our experience is that tenants are often looking to negotiate with their property manager to find a middle ground that suits both parties. We are always confident that our recommended rent increase would be reached in the open market, if the tenants are not willing to come to an agreement with us and our landlords.
What are the laws around the frequency of rental increases?
In Queensland, tenancy legislation is governed by the Residential Tenancy Authority. For all new agreements and existing fixed term agreements, you may increase the rent after 6 months since the last increase. The rent cannot be increased during a fixed term lease unless it was initially specified in the tenancy agreement and the following procedures are to be applied.
Both parties will need to agree on the new amount as well as the day and date it will take effect. The typical notice period for any upcoming rental increase is 60 days in advance. The increase within a fixed term agreement does not automatically come into effect, a separate written notice must be provided to your tenant. This should include the increased amount and the day it takes effect.
If a new agreement is not executed for an existing tenancy, it will automatically become a periodic agreement. With a periodic lease, the rent can be increased by giving 2 months notice prior to or on the commencement of the periodic lease. Additional rental increases for an existing periodic agreement can only take effect 2 months after the commencement of lease. Tenants can dispute rental increases if they feel the increase is excessive and apply for a dispute resolution once the new agreement is signed.
What should you do if you know your rent should increase significantly but your property manager is reluctant to increase the rent?
If your rent should increase significantly but your property manager is reluctant to increase the rent, call Hugo Alexander Property Group and request a rental review. We will provide you with what can be achieved.
It is imperative to bear in mind that property managers must always act in the best interest of the landlord. They should treat your property as the business that it is and strive for continuous growth and profit for you.
In the event of a significant rent increase being proposed, the property manager must assess the income earners in the household, their base salary, whether they have been in arrears, and whether there have been any new additions to their family. If any of these factors apply to the situation, it may be wise to compromise and accept a smaller rent increase to minimise the vacancy period and reduce the risk of losing good tenants during their difficult times.
How should you respond when your property manager tells you that by increasing the rent that your current tenants may leave or will be stressed out?
Property managers use data to determine market pricing and the correct price increase, while keeping in mind the potential negative effects of pushing tenants out. Landlords may consider compromising with tenants if there are factors that make a significant rent increase difficult for them to bear. The attitude of the tenants, whether they pay rent on time always, and how they keep the home are all things to consider.
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