While raising rent probably isn’t on any landlord’s list of fun ways to spend their day — given that tenants won’t exactly respond to the news with happy excitement— it’s a necessary part of property management.
Here are the top 5 reasons to consider raising rent.
1. Keeping Up With the Market
One of the best reasons to raise the rent is keeping up with the local real estate market. A 2018 report on the rental housing market from the New Zealand Property Investors Assn (NZPIF) indicates that the rental market continues to tighten across the country, with prices increasing as demand rises. This report shows overall, rental prices are up 4.4% to $433 per week. This is about the same price rise compared to the year ended April 2017 when rents rose by 4.2%.
In fact, the vacancy rate is the lowest it’s been in a few years. Trademe shows there are 1557 properties for rent in Christchurch currently in July 2018. This is down from the 2550 that we saw at the top of the market around 2015/16. Pre quake was 1800, post-quake was 350 and then out to the 2550 and now we are back to below pre quake levels.
Taken together, these statistics all indicate that when you decide to raise rents, you’ll be in good company. One of the easiest ways to determine whether your rental rates are commensurate with local rates is by using this rent comparison tool. It’s easy-to-use and will allow you to evaluate your rental rates as compared to other, similar rental properties in your area.
2. Neighbourhood Enhancement
As a result of the Earthquakes we are seeing a lot of neighbourhood’s change and improve - your rent should follow suit. When new businesses and services come into an area, it can make a community much more attractive, changing a location from simply acceptable to desirable — bringing property values up along with them. Your rental rates should reflect this. Features to consider include:
• New businesses, such as grocery stores, eateries and coffee shops
• New services, such as libraries and post offices
• Public transportation upgrades or new bike trails, running paths, green spaces and parks
3. New Employers
When a large company moves into an area, it’ll bring increased job opportunity, increased incomes and a reduced unemployment rate — all factors that help raise housing prices, values and, accordingly, rental rates. People want to live near where they work, so your property will become more desirable.
4. A Rising Local Economy
Housing markets across the country are experiencing growth as the economy continues its slow, but steady, recovery. In mid-2013, housing prices were up by 6.9 percent (YTD May 2018) with an average house price overall in NZ of $677,996 compared to $634,018 in May 2017, according to a report from QV.
Raising rent to keep up with this increase in housing prices makes financial sense.
5. Property Improvements
When the property owner makes improvements, raising rent to reflect this added value is a no-brainer. Whether they’re re-doing the kitchen or bathroom, replacing the carpet or tiles, insulating or landscaping the exterior, changes that add to the property’s appeal cost money — and that money should be recouped through higher rental rates.
Breaking the news about raising rent may not be an experience any landlord or property manager looks forward to, but it’s a necessity. We can offer you tips on raising rents and keeping tenants to help you through this sometimes challenging process.
An active investor with her husband Hamish, Claire loves to inspire & inform others, all whilst juggling three little boys and living her mantra to eat well and travel lots.