The rental property shortage will get worse, but we can get better

Domain data for last month revealed that Sydney’s vacancy rate is just 1 per cent, down from 2.2 per cent the year prior. We’re witnessing the reality behind this statistic every day — our properties across inner Sydney are averaging 20 people through the door for the first open home and 10 applications. Some tenants are offering up to $100 to $150 above the asking rent in the hope of securing the property quickly, while others come with their documentation prepared after only seeing the images. We’ve even had well-intentioned parents write to us vouching for their children’s good character, in a market that’s proving near impossible for young tenants without rental history to compete.

It’s a situation that would have been hard to imagine two to three years ago in the grips of the pandemic — a time when rents were drastically reduced, and the vacancy across our managed portfolio shot up to almost 5 per cent quite literally overnight — well above our long-term average of 1 per cent.

Unfortunately, it doesn’t appear that conditions will ease anytime soon. Next year will see more students, workers and residents return to our shores following the opening of borders, with even more of a bottleneck likely to occur at the start of the education terms.

Then there’s the continued return of residents to the inner city from various regional areas. They’re eager to re-establish themselves, their lifestyles, and their livelihoods post-pandemic. This has continued at a steady pace over the year, with the COVID conditions stable enough for them to now not have to consider the potential of future lockdowns or work-from-home orders they did before.

It’s not just those returning to Sydney who are creating the demand — it’s also those who stayed. Many residents utilised the pandemic as a chance to upsize from a share house into a studio or one-bedroom apartment due to the large rent reductions on offer. Today, many of them have been priced out, with their options now focused on returning to shared-living arrangements (be it a share house or with family) or looking for a comparable property elsewhere. This comes with knowing that this won’t only be a process that’s incredibly competitive, but one that reflects the difference between what your money could get you 12 months ago and now.

Of course, interest rate rises have exerted further pressure. There are many aspiring home owners who’ve had to pause their plans and are now reconsidering when they’ll be to take that step in the foreseeable future, if at all.

The truth is Sydney was already facing a rental property shortage, well before the severity of these factors became apparent. Policies and conditions associated with investment properties saw many owners exit the market, tired of dealing with what they deemed to be unnecessary red tape.

Add to this rising inflation and the current cost of living, and the significant lack of affordable housing (which I can only begin to touch on here), and it’s no surprise Sydney’s rental market is in a state of crisis.

While there’s more to be dissected about the why and how we got to where we are, let’s not forget the influence and impact the property management industry can have. It won’t grab headlines, but it will help us navigate the challenges, build trusted relationships and resilience and remember, a lot of it is out of our control.

Respect the emotion
With stress, tension and, in some cases, desperation, hallmarks of the current rental market, it’s crucial that we can demonstrate to tenants a genuine empathy and understanding. The perception that you can’t service both the property owner and a tenant, particularly in leasing, is long out of date. In fact, there’s never been a more important time to do both. It’s about transparency on price expectations, the property owners’ motivations, and approaching each situation with maturity and sensitivity. To do this, however, requires us to respect our own emotions. Take a step back when needed, and realise that you’re building your own resilience, communication skills, emotional intelligence (EQ) and more with every challenge you rise to.

Education
EQ lays the foundation, but education is what will take it to the next level. Helping tenants understand what they can do to strengthen their application is not only a practical way to have a positive impact on each person that we communicate with but will also help you build trust.

Tips like acting fast on properties that they’re interested in, and having their references prepped and ready to go, will be particularly beneficial for those who don’t have much rental history, or who may not be as familiar with the local application requirements.

Property owners can benefit from education too. This is not because either party is uneducated or incorrect but because providing a trusted perspective that’s less emotionally driven, and more focused on the long term, can deliver clarity amidst the chaos.

Bridge the divide (between property owners)
This is where education and the holistic role of property management really come into play. The market has exposed two dominant investor categories — the more experienced with higher levels of equity to their name, and those who are newer to the investment market. The key difference here is the decisions they’re focused on. The former is likely to be more accepting of an excellent tenant re-signing early for minimal rental increases and recognise the benefits of a secure occupant and no vacancy period. The latter is likely to be more concerned about maximising the full rent possible to assist with higher holding costs.

While we will, of course, always respect the directive of our clients — no matter their equity or years as a property owner — I believe that it is our role to foster a longer-term mindset with clients and always demonstrate that a higher financial return does not always equate to higher quality, security or tenure.

It’s personal (or is it?)
Our industry is used to being the link between property owners and tenants, which, even at the best of times, involves conflict mitigation, resolution, and negotiation. But when the levels of stress in the market are peaking, it’s important that we keep ours in check.

Having a trusted colleague or mentor, be it inside or outside your organisation, will provide a safe space for you to work through challenges, reflect on the wins, and prepare for next time. Don’t be afraid to ask for help, whether it’s in the form of time off, resourcing support, or guidance with a tricky situation.

The best thing we can do for each other and our industry right now is to support, listen, educate, and act when needed. And if we can do that, we’re creating the conditions, networks, and relationships for the future.

Chantelle Collin is the head of property management at BresicWhitney.