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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP.1285 "Tenant Arrears Update: How Tenants Are Coping in the Current Economy (Aug 2024)"
What if the fear of losing your rental property is actually helping tenants stay on top of their payments? In this episode, we explore the intriguing dynamics of the current rental market, where tenants are managing to prioritize their rent commitments despite economic pressures. We compare today's trend with the COVID era, unveiling how the risk of facing higher rents and moving costs is driving tenants to stay current on payments. You’ll gain insights into tenant arrears, understanding why most tenants manage to catch up quickly, and how overall terminations and long-term arrears remain under control. Additionally, we touch on broader economic behaviors, such as the reduction in dining out, which reflects how people are cutting back to manage their finances.
As we shift our focus to the northern beaches, we uncover the scarcity of houses available for rent and how tenants are navigating this challenge. Discover why quality and amenities like air conditioning and dishwashers are becoming top priorities, even over affordability. We'll discuss the particular difficulty in finding larger homes for families and why these properties are increasingly rare and held onto for longer periods. Despite these hurdles, our analysis reveals that tenants are weathering the current economic conditions with greater stability than during the height of the pandemic. Join us as we dissect these trends and provide a thorough update on the rental market landscape as of August 2024.
Tenants, investors, the world wondering how tenant arrears are going. We're going to give you a tenant update on properties, how tenants are performing in this economic climate. Stay tuned. I'm the ringleader, cleo Witte, expert property manager, with us today, the lady that manages 4 million properties, 25 million properties. How are you this morning?
Speaker 2:It feels like 25 million sometimes. No, I'm good. I'm loving this spring weather. I am so ready for summer. I'm done with winter. So, yeah, I'm good, I'm good I agree with you on that.
Speaker 1:Look, I do like my winter, but I do like the end of it at the same time. Um, but the doors are opening in at home, the windows are opening and staying open for periods now, whereas before it was like.
Speaker 2:Yeah, I'm not. And the heater is so stuffy Like just not having the heater on or the air con is just yeah, I'm loving it.
Speaker 1:You got gas heater.
Speaker 2:Gas heater. It's great, but you can really tell the difference in the air Like it's just a heavier air.
Speaker 1:The air quality is completely different, but I do love it. But anyway, over to arrears. Yes, cleo, you went through a period through COVID, a scary period of arrears control with managing tenants, and I thought I'd bring it to the surface this morning because I think, as a landlord or as a tenant, you know if people are out there filling the squeeze, you know, with, uh, the economics or with rates or whatever they are, they must be thinking, you know, must you know? Is it like this for everyone or is it? You know, this is really hard for me, but what's actually happening out there? Covid was an isolated, massive example of where we were very worried about tenancies paying their rent to date commercial tenants, residential tenants, all tenants. How has it been lately?
Speaker 2:I feel tenants are maintaining their commitment with rent, and all the hype of the property shortage and how tough it is out there for tenants to find property has really, I wouldn't say scared tenants, but it has made their properties. You know, the most important thing at the moment is having a place to rent, making sure you know you are paying rent on time so as not to jeopardise needing to be back in that market where you're looking for property where rents are really high. You might be on a, you know, reasonable rent or a good wicket, so to speak, with the owner. So I think that property sector has made everybody appreciate that housing is the most important thing besides food.
Speaker 1:That's interesting because we didn't really have that big brother hanging over our head of like through COVID. It was like, well, if I do have to leave here, there's always somewhere else I can go. But you know, I better make sure I keep this right, otherwise there's a level of difficulty it's harder to find something else. Never thought of that.
Speaker 2:No, and they're going to need to pay more, and it's just. You know the reality. The rent is going to be probably $50 a week more than where they're at if they're moving, plus removal costs and all those costs associated with moving and just the annoyance of taking time off, work, even because people you know having having, you know secure job and not having days off and things like that is also really important at the moment. They're saying this morning that you know people aren't eating out as much and you know tightening their belts, and I didn't feel that more than I did. Last friday night we went out with the girls and there was no one in the restaurant. There was no one, not one other person than us, for a normally, you know, really bustling place. Um, so I think that's. I think that's what people are doing renting their number one. I think that's what people are doing renting their number one, making sure their rent's on time and then cutting back on other things, is reality at the moment.
Speaker 1:Yeah, look, I don't mean to be like making a situation worse or amping it up, but I do genuinely think that sometimes people out there feel like they're alone. You know, if you're a tenant, that's you know. Possibly, you know, looking at finding it hard to sort of pay the level of rent that's out there at the moment, you're thinking you know, oh my God, you know, is this out there with everyone or is it only me? And I think to echo that, you know we're all in it together is strong, you know, to help people. But then I also think, as a landlord, like I'm thinking I actually don't even know if I have the gut to whether arrears with tenants not paying rent, but is it actually a real thing where that's happening out there? So you would have percentages across, for instance, 2,000 properties. You would have like a percentage average of arrears, control what the average day is across the portfolio. How many people are actually in arrears? Is that changing, like the raw data of people in arrears? Has it gone up a touch or what? What's happening there?
Speaker 2:no, I don't feel it's climbing. I think we're quite stable. I do look at my arrears in my portfolio each day and I look at a key indicator terminations. We I have had no terminations for over 14 day arrears. Most of the tenants that are in arrears are below that 10 day mark and then they catch up. So they're about a week behind and then they catch up again. I haven't had to terminate or go to NCAT for a tenant that hasn't paid beyond two weeks, which is really really good in comparison with COVID. You know, with COVID we had a lot of tenants that crept up past that time but you couldn't terminate. They still, you know, topped up that rent account and kept paying, but at the moment I'm not seeing anyone really fall behind that much. It's. It's one of those things. But you know, with with landlords, with interest rates, the way they're going, they can't. Also, there's no leniency for arrears for some, some of our clients because their their mortgage has gone up so much over the last year or so.
Speaker 2:They can't afford to wait and they don't have that surplus to top up their mortgage. They rely heavily that rent being paid on time, which is what we do. We ensure that. You know we keep that dialogue open with the owners and the tenants so if there is an instance where they may be short one month in their payments, that they are prepared for that. But yeah, I think tenants also know that. They must know that landlords you know with the banks and the way that things have gone, you know that rent is very, you know, heavily needed on time.
Speaker 1:Do you? What are the telltales with a tenant that's there. Oh, actually I have two questions. First question is the average rent for a two-bedroom unit in DY. Where is it at the moment?
Speaker 2:Two-bedder is around $750.
Speaker 1:And the average rent. Okay, and the average rent 10 years ago for a two-bedder.
Speaker 2:Oh gosh, it was like $550, $600, you know something like that. Well, actually, if you've got a two-bed, two-bath, two-car, you can expect to pay $850 now, so the two-two-two, but with a one-bedder, you know, $750 to $800 for a decent property. We're not talking about the luxy one bedroom, plus studies that can reach anywhere up to 780. But for an average two bedroom, yeah, probably about that 780, 800 mark.
Speaker 1:I'm going to rephrase so in 10 years property values have doubled but rents haven't doubled. Rents have probably done about 30% over a 10 year period. They seem to have levelled out. Do you find that tenants are changing the category of property they're enjoying now because of things possibly tightening up? So do you find that where before they went for a house they go for a unit, or where they were in a premium unit they're going to more of an average unit? Are you seeing that shift? Or is it everyone just sort of buckling down due to arrears?
Speaker 2:yeah, to be fair, I don't feel like the older rental stock is still attractive, that still sits around on our market. I think, um, tenants, especially on the northern beaches, are still wanting, you know, quality over. You know cheap, um, especially, you know the things that you're used to, like aircon, dishwashers, things like that. So, um, the housing market for houses that houses are so scarce really, they're very, very scarce for houses um, you did a segment a little while ago about you know people sharing property with their families and friends and grandparents. We're finding that that's still a real thing and the availability to rent a four-, three-bedroom house is just nothing available.
Speaker 2:I've got four families I'm looking to place in a house at the moment and I don't have anywhere. So there will always be units to rent, I feel, but the commodity of houses, like I don't know where that's going to go. There's not a lot of houses left for rent on the northern beaches and the people that rent houses stay for a long time. It's not something you flip in a year or two like a unit. You stay for five, six years while your kids are in school. So, yeah, they're held tightly within the renting community.
Speaker 1:So, in summary, tenant arrears update with Cleo here how are tenants coping with the current economy in August 2024? You're going to go out with these quotes.
Speaker 2:I feel like everyone is still coping. Everyone's head's still above water. It's not dangerous like it was during COVID.
Speaker 1:Boom.
Speaker 2:See you everyone.