Brisbane Rents Falling Substantially - What Are People's Thoughts?

cannedhams on 08/11/2016 - 13:07

I was casting about for a house to rent next year because I sure as hell dont want to stay in this one, and I immediately noticed that the asking rents seemed very soft compared to even a year earlier. In one instance, a house that I personally rented for $355 dollars only one year ago is back on the market for $300.

So I searched and found this article from the Courier Mail http://www.couriermail.com.au/realestate/this-is-where-rents…

Its behind a paywall but the gist of it is:-

HOUSE rents have begun crashing in Brisbane suburbs where major apartment developments have gone up, latest data shows. South Brisbane, where the majority of inner city apartment developments have concentrated in recent times, logged the second highest crash in rental rates for houses in the Queensland capital. Median house rents there dropped by a third (-31.1 per cent) to $365 a week. New Farm, which has also seen significant apartment development activity, logged the fourth highest drop in house rents in Brisbane, falling by a fifth to $600 a week (-21.1 per cent). The biggest fall in house rents in Brisbane came out of Pinkenba where the median rent dropped -36.7 per cent to $285 a week. Ellen Grove saw the third highest fall, down -24.4 per cent to $310 per week, while leafy upmarket Pullenvale has also struggled as the mining downturn drains the city of executives, with houses rents down -15 per cent to $850 a week."

I spoke to someone who said that their agent offered to extend their apartment lease "for only ten dollars more a week". The tenant said "how about fifty dollars less per week?" The agent said: "ah, okay", as if to say "oh, so you know? Damn". They eventually settled on forty dollars less a week.

I can't help but think that even more apartments are going to come online, and whether this might bring rents down further by the time I actually move (in about four months time). Also, a lot of properties would have gone cash-flow negative because of all this, and whether this might spur people to try and sell…

Financial

Comments

  • k-rokfm on 08/11/2016 - 13:27
    +1

    I spoke to someone who said that their agent offered to extend their apartment lease "for only ten dollars more a week". The tenant said "how about fifty dollars less per week?" The agent said: "ah, okay", as if to say "oh, so you know? Damn". They eventually settled on forty dollars less a week.

    Not suprised by this tactic by the real estate agent. They would probably get a lot of people going "oh yeah i like it here and its easy enough to stay" and just accept it and move on. Our home owner tried to get us for an extra $20/wk but we managed to get an extended contract for the same as what we were paying before (in ACT, not brissy). But it definitely pays to see what the market is before you resign a lease

    • cannedhams on 08/11/2016 - 18:57
      +3

      Most of the time you can just say "no" and they'll wear it. Even a vacancy of one week would quickly eliminate any advantage due to increased rent.

      I quickly learned that there is no advantage in being nice to real estate agents. They'll never reciprocate. Play the game hard but fair. That way when you leave they'll be happy to see you gone and wont muck you around so much.

    • [Deactivated] on 18/11/2016 - 15:24
      +1

      My mate faced a similar situation in Docklands, Vic.

      He was leasing a two bedroom, one bathroom, no parking bays, no views, for $550 per week. The price was unchanged for 3 years. Great tenant, the apartment is only used on weeknights, never cooks.

      He knew he could negotiate the rent down as Docklands tanked but he couldn't be stuffed. He was surprised when the agent sent him a letter with a foreword that he has had a good deal for the last few years with his rates not being increased. They wanted $575.

      The agent didn't know he is a professional senior valuer. He counter offered with $400.

      The owner had all his eggs in Docklands and cannot afford another vacancy. He ended up leasing a three bed, two bath, one car spot with ocean view for the original sum.

      Same owner.

  • mskeggs on 08/11/2016 - 13:29
    +13

    Nothing to worry about. Aussie real estate only ever goes up, a 10% annual appreciation is in the constitution somewhere I'm pretty sure.
    Decreasing rents just mean a bigger deduction for negative gearing!
    If anything, this moment of uncertainty will reward the brave investor who can scoop up another few properties with a 100% LVR.

      • scrambledeggs on 08/11/2016 - 13:48
        +26

        I remember my first experience with sarcasm.

        • Steptoe on 08/11/2016 - 19:32

          😂

    • cannedhams on 08/11/2016 - 18:47
      +1

      Decreasing rents just mean a bigger deduction for negative gearing!

      Too right. More losses means more tax deductions. Woohoo! Just look at the losses I'm making!

      • tomleonhart on 08/11/2016 - 19:08
        +1

        But i save heaps on tax :D

      • Bronnie on 09/11/2016 - 17:24

        I'm trying to work out if mskeggs and cannedhams are serious or tongue in cheek… A lot of people don't understand how negative gearing really works. It is not a means to EVADE tax, it is merely a means to POSTPONE tax - till the time when you sell the property. Then you have to pay up in full. The only benefit is if you can keep the property till you are on a lower income and sell then. Usually doesn't happen that way. And heaven help you if you sell for less than you bought (because you need the money now). Then all your "savings" in negative gearing are added back in and your loss is diminished substantially. The taxman always wins.

        • cannedhams on 10/11/2016 - 17:19

          The incentive of negative gearing is that you hope that capital gains exceed the holding losses incurred by the investment.

          Yes, you pay cgt ultimately, but of course you get a 50% discount on cgt, meaning you still finish up ahead even if you only just break even (ie your capital gains are just sufficient to pay you back for the losses sustained during ownership).

        • mskeggs on 10/11/2016 - 18:33

          To be clear, I was being sarcastic, and poking a bit of satire at the property spruiker class who can see no downside to property.
          I personally think it is a dreadful time to buy property if you have an option not to.

        • virhlpool on 20/02/2017 - 21:13

          @mskeggs:

          I personally think it is a dreadful time to buy property if you have an option not to.

          Bad time for some places/ cities is always good for some other. Australia made a lot of money when other countries had bad time. Perth made a lot of money when some eastern cities had not-so-good time.

    • HeWhoKnows on 09/11/2016 - 12:08

      What a load of CRAP! I have seen property PRICES drop 20% in the most desirable places in Sydney and up to 33% in lesser suburbs.
      Just because we are in the middle of a property boom right now doesn't mean prices will always go up. In fact I think you will find its all downhill from next year!
      And NO! Falling rents are NOT good for property investors as they reduce the amount that can be borrowed and also smash the investors cash flow and hence ability to service the loan. Some are hence forced to SELL!
      End result lower rents flow into even lower prices.
      The only thing holding this market up right now and keeping it affordable is the lower and lower interest rates which are offsetting the reductions in rents.
      As we are at the bottom of the interest rate cycle it means prices have peaked at a time that rents are falling….not good!
      This is suicidal for any investor entering the property market right now.

  • inherentchoice on 08/11/2016 - 13:50
    +1

    I'm personally hoping there is a downturn in the property market, for rents and sale prices.

    Some investors won't be able to afford repayments and so will put their properties on the market.

    There might not be a crash, especially not at first, but rather a gradual decline. Of course I honestly don't know the future and I could totally be wrong but time will tell.

    • HeWhoKnows on 09/11/2016 - 12:13
      +1

      Watch the clusters of high rise developments. That's where the action will be. But also a good place to always avoid as any concentration of apartments means there are always plenty on the market competing with each other to be sold = lower prices always!
      The places to buy will be near but not in any concentration of apartments.
      Also history has shown such clusters commonly turn into ghettos, especially as the quality of build is so poor today!

    • HeWhoKnows on 13/11/2016 - 13:56

      See my comment. Answers your comment/question

  • Skramit on 08/11/2016 - 14:17
    +2

    So all the whinging sydney-siders who say they can't afford to rent or buy, should move to Brissy.

    2 birds one stone.

    • dogboy on 08/11/2016 - 14:35
      +2

      Umm .. no thanks. A lot did this in early 2000s and drove up the Brisbane property market. Then we are left with more expensive houses and a bunch of NSW whingers carrying on about how much they liked Sydney better. Lose lose.

      • Skramit on 08/11/2016 - 14:53
        +1

        Awww and here I was thinking I was an ideas man and had just solved property prices in Sydney.

        Dammit. :P

    • HeWhoKnows on 13/11/2016 - 13:57

      Better income. Better lifestyle in Sydney. Possibly even better weather!

  • andreyozbargain on 08/11/2016 - 16:05

    I always negotiate a rent price before renting.. My last one was listed for $360..I asked for $340 and got it.
    Actually, here is nothing to support prices of hundreds thousands for houses here except faith.

  • jellykingdom on 08/11/2016 - 16:12
    +1

    PS. just type the article title into Google and link through there. it gets around the paywall

    I'm skeptical about those numbers. 30% drop is catastrophic anywhere, let alone in our 3rd largest city. This would be national news and a crisis that would be threatening the rest of the country. But this is literally the first I've heard about it, all I have heard is that Brisbane is still on track for 7% pa growth. I think it is maybe a statistical trick related to mean vs median, and there have been heaps of new apartments coming online recently so definitely concern re oversupply

    "The biggest fall in house rents in Brisbane came out of Pinkenba where the median rent dropped -36.7 per cent to $285 a week. Ellen Grove saw the third highest fall, down -24.4 per cent to $310 per week, while leafy upmarket Pullenvale has also struggled as the mining downturn drains the city of executives, with houses rents down -15 per cent to $850 a week."

    I get Pullenvale dropping - $850/week is pretty steep so sounds like a price correction.
    Ellen Grove is near Carole Park, which is an industrial shit-hole.
    Pinkenba is next door to the airport, and on the wrong side too, so perhaps people just don't like the area and can now afford to move to better location because there's more available housing stock?

    Hell, it could even be that Brisbane is so much cheaper than Melb and Sydney, and still going up, that people have decided to buy instead of rent so there's less renters available? Even Perth (which has obviously been hit WAY worse by the mining bubble) has only seen small rent reductions

    • cannedhams on 08/11/2016 - 18:54
      +1

      I agree to a point. its definitely not 30% across the board. The RTA says that rents have decreased by $10 over the last six months:-

      https://www.rta.qld.gov.au/Managing/Open-house-property-mana…

      that people have decided to buy instead of rent so there's less renters available

      Theoretically it shouldnt make a difference. If a renter decides to buy, they're taking both a renter and a rental property out of the property market (most of the time). The net effect should be close to zero.

  • JIMB0 on 09/11/2016 - 09:32

    I've been on a month to month lease for a few years here in Melbourne. Yesterday I got an email from agent wanting to put me back on a 12 month lease for the same $ I'm paying now.

    • HeWhoKnows on 09/11/2016 - 12:29

      Says it all. They are trying to hold onto their tenants.

      • JIMB0 on 09/11/2016 - 18:38

        I was thinking they might be wanting to sell and having a tenant locked in on a 12 month lease might help.

        • HeWhoKnows on 13/11/2016 - 14:01
          +1

          No way. That would be suicidal. They are not allowed to do that.
          Anyway, Do your research. Check out local rents in realestate.com.au You might find rents have actually DROPPED since you moved in. That's why they try to lock you in at the same rent. Think about it. If you were the property manager isn't that what you would be doing if you had high vacancies and falling rents? Id be looking for an opportunity to sign at a lower rent. But look for the justification on the TO LETS.

        • JIMB0 on 13/11/2016 - 17:19

          @Amayzingone: I had a quick look online and the rent I'm paying now is about $40/wk less than most other similar places. The place I'm in now is a bit older, however it is in a much better location. Not sure if the advertised rents these days are negotiable.

  • ozeebee on 21/02/2017 - 02:35

    As someone who is thinking of investing in a house in Brisbane, say 20mins drive away from the CBD. Is this now a bad idea?

    • cannedhams on 21/02/2017 - 11:26

      It depends on what you're looking for and it depends on the house.

      Personally, I would keep thinking about it for another year, and see what happens. Just IMO. But no one can tell the future, as they say.

Login or Join to leave a comment
Login Join