Record rents, rising costs: is now the time to review a multi-property Brisbane portfolio?
Brisbane rents have hit a record high, and if you own more than one property it’s worth stopping to look at what that really means for you. The latest Domain Rent Report has the median asking rent for a house at $700 a week and a unit at $660, which is $40 a week more than this time last year for houses and $20 more for units. But the story is in the last three months, because rents have stalled, and the reason is that tenants have basically hit the limit of what they can afford to pay. Domain’s chief of research and economics, Dr Nicola Powell, calls it an affordability ceiling, and she says renters can only stretch so far, so they’re moving to cheaper locations or sharing to make it work. Vacancy is still sitting at a near record low of 0.7 per cent and rental listings are down on last year, so it’s still a landlords’ market on paper, but the pace of growth that owners got used to is slowing right down.
Rents have stopped climbing, costs have not
Here’s the part that doesn’t get talked about as much. While rent growth has flattened out, the cost of holding property has gone the other way. The cash rate has moved up to a 15-year high of 4.6 per cent, which means the debt sitting behind each investment property costs more to carry than it did a year or two ago, and the May federal budget wound back investor tax incentives as well. Dr Powell points out that landlords are feeling that squeeze just like renters are, and if you own two, three or four properties, that pressure is multiplied across every loan. So you can have record rents coming in and still find the numbers feel tighter than they should, because the income has levelled off while the costs haven’t.
That’s why a lot of multi-property owners are starting to ask whether this is the point to rebalance. When rents are at their highest ever, you’re also showing a buyer the strongest income figures that property is ever likely to have, and the budget changes were designed to help first home buyers and owner-occupiers, who tend to love a well-presented Inner West home or unit and aren’t affected by investor tax settings. Selling one property doesn’t have to mean leaving the market, either. It can mean paying down debt on the ones you keep, releasing some equity to diversify, or simply taking pressure off your cash flow so the rest of the portfolio can sit comfortably through a few more rate decisions. On the flip side, holding every property carries its own risk if rates stay high and tenants keep running out of room, because that can show up as longer vacancies or rent you simply can’t push any higher.
Now, to be fair, there’s a case for holding too. Vacancy is tight, supply is limited, and Dr Powell notes the final quarter of the year is usually the hottest for rents, so plenty of owners will choose to stay put and that can be a perfectly sound decision. Selling brings agent fees, a possible capital gains tax bill and the cost of getting back in later if you change your mind, and every owner’s debt, tax position and goals are different, which is why it’s worth speaking with your accountant and financial adviser before you decide anything. If you do have a tenant in place, there are also obligations under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) that you’ll want to understand before any sale goes ahead.
If you own more than one property in Paddington, Red Hill, Bardon, Toowong, Auchenflower or Milton, we can put together a portfolio review that shows what each property could achieve today, what selling one or two could look like, and how that compares with holding. Then you can take real numbers to your accountant and make the call with the full picture in front of you.