We have seen an interesting change in the reasons why tenants are vacating.
Early in 2016 the majority of tenants vacated due to the down turn in the resource and construction industry. They were being retrenched or reaching the end of their working contracts.  This applied particularly to those in apartments. There was also a degree of upgrading and moving from apartment to houses as cheaper and more appealing premises became available.
We are now seeing other reasons for tenants vacating.  Tenants told us it was cheaper to live on their own than to share housing and this attracted them.
• Combined with Low Interest rates has resulted in many tenants buying their own homes as the affordability index in Perth is at its lowest for many years.
• The increase in the State Government’s first home first home buyers grant to $15,000 for new homes or apartments combined with the low mortgage interest rates of below 4% has also prompted a change in the rental dynamics.
•We don’t see either of the above factors changing in the next year or so.
• Tenants are upgrading to newer, modern homes with amenities such as dishwashers and air conditioners. With the high number of vacancies (approx. 11,000 in Perth) combined with the increased number of new apartments they have a large choice.
• It may be the time of the year but our property managers report a number of marital and partner breakups some of which are caused by financial pressure.                                                                   •They swap their apartment to move to another property in the same complex at a lower rent.  Rents have dropped between 10 and 20% in the past year.
• With WA unemployment around 6.8% we have also seen a change with tenants moving to the Eastern States seeking employment in the stronger economies of NSW and Victoria.
• Tenants chase lower rents with rents dropping 10-20% in the last year. Often in the same building complex where there is no great effort to move.
•There are signs that the downward trend in rents has bottomed so hopefully this type of relocation will slow
• Tenants are moving into better homes with a shift from apartment living to near city suburb houses with nearby schools, transport facilities and entertainment/lifestyle facilities such as beaches and coffee strips close by.
Our Advice
1. Older apartment/units have to be upgraded to appeal and compete against the newer developments which are renting cheaply in the current market. The increase in apartments available will continue in 2017 and some investors may suffer financially.
2. Be prepared to drop the rent to minimise losses due to longer vacancies and to keep your current tenants in the property.  By holding onto your existing tenants you are avoiding loss of rent and additional costs like advertising, final bond inspections and letting fees.
3. Be prepared to upgrade your property and add value by adding a dishwasher, air-conditioning, built in robes, a patio for entertaining.