Perth Property Management in 2022: End of Year Roundup
2022 has definitely been a busy year!
The COVID-19 pandemic has continued to affect the Perth property market since 2020, with record-high inflation accompanied by rising interest rates that are expected to continue rising as we head into 2023.
Putting that aside, the outlook for house prices and rental returns is still pretty solid. This year also witnessed a number of new initiatives and regulations that affected investors, first-time home buyers, landlords, and tenants.
As the year approaches its end, we’ve created a round-up of the 2022 property market highlights and what to expect in 2023.
The WA Property Market in 2022
According to a recent report, Mid-year Perth outperformed Sydney and Melbourne for price growth. With a steady rental price growth in Perth, the prospective for the property market in the city is definitely promising, despite rising interest rates.
This means that 2023 is a great time to watch and act in the Perth property market.
Rising Interest Rates of 2022
This year witnessed a 30-year record rise in inflation rates, according to the Australian Bureau of Statistics. The inflation rates are expected to continue to increase into 2023. Based on the Reserve Bank of Australia (RBA) forecast, inflation will reach 7% by the end of the year.
There are various factors behind the rising inflation rates. Most importantly, inflation is directly related to the official cash rate target the Reserve Bank decides. This figure can be thought of as the cost of borrowing money. The higher the cost, the higher the interest rates the customers will pay when they receive loans of all types.
For WA investors, the rising interest rates can make interstate investors more interested in buying properties in the west. At the same time, WA buyers will be more reluctant to purchase a property, causing a shift in the supply-demand mechanics.
Demand will naturally decline, and property prices will decrease. On the flip side, there’ll be fewer vacancies that are concurrent with stronger returns, backed by Perth’s reputation of being a low-vacancy, high-value rent region.
The disrupted market also presents taxation advantages like higher loan interest deductions and larger tax refunds, which can strengthen your post-tax cash flow positioning.
WA investors can survive this economic crisis by optimising leasing outcomes, ensuring their properties earn the best-valued rent they can and keeping vacancy rates at bay. After all, high-valued rents translate to a better cash flow.
It’s also important for WA investors to partner with trusted professionals in property, taxation, and finances.
Top Tips for First Time Landlords
Here are some handy tips for new landlords to maximise their return on investment:
Properties are long-term investments, and their values increase as years go by, hence why banks use them as collateral. Long-term thinking also decreases market volatility levels, ensuring consistent capital growth.
Being proactive can help you maximise your property investment returns. For example, you can set calendar events to assess the market and make better decisions 2-3 months beforehand instead of waiting until lease contracts are almost expired. This will also help you retain your favourite tenants.
Increase Your Rental Return
The best ways to maximise your rental returns are to set proper rental prices and keep track of expenses. Adjusting the rental prices to match those of the market will help you maintain a positive cash flow throughout the year.
Keeping records of your expenses will also make it easier to identify the costs that you can claim through the Australian Taxation Office (ATO). These include council rates, water service charges, and capital improvements against tax.
Familiarise Yourself With the Western Australia Tenancy Laws and Regulations
Learning about relevant tenancy laws and regulations will help you avoid pitfalls and keep your business running. These include rent increases, rent arrears, privacy, property advertising, security, health measures, etc.
For more about the essential tenancy laws and regulations in Western Australia, check out the Residential Tenancy Act 1987 (RTA).
Ensure There’s a Rental Agreement
To maintain a sustainable landlord-tenant relationship and keep yourself protected with documentation, always make sure that you set up a rental agreement with your tenants. This will also help you clarify your expectations before going forward with the rent.
New Landlords are highly likely to overspend in their first year in business.
Before spending on anything, like renovations, ask yourself whether these spendings are worth it. Some expenses are almost guaranteed to translate into a return, while others may not make that much of a difference. Setting a budget can also be a wise good step here too.
Consider Opting for Landlord Insurance
Landlord insurance provides protection against unexpected situations, such as rent default, property damage, rent loss, tenant lawsuits, natural disasters, and theft. With landlord insurance, you can enjoy peace of mind that your property investment and rental income won’t be negatively affected.
Dedicate More Time to Tenant Screening
Tenants can either make or break your property investment. Checking your potential tenant’s rental and criminal history, as well as their credit score and employment history should make it easier for you to decide whether they’ll be a responsible tenant.
At the same time, you need to find ways to retain good tenants by keeping them happy. Help them with any concerns or problems they have throughout their rent and avoid forcing significant rent increases.
Carry Out Regular Inspections
Ongoing inspections will help you identify problems as soon as they happen, allowing you to schedule maintenance sessions around your rental plans. This will also help you keep your property well taken care of for your good tenants.
Rentvesting in WA: Everything You Need to Know
Rentvesting is a homeowning strategy that lets you rent a property in an out-of-budget region and buy another property in a suburb that’s more suitable for your financial situation.
This means you’ll be paying rent rather than mortgage repayments. It’s an excellent solution for people that want to own a property in an area that appeals to them while using their remaining capital to get another more budget-friendly property and rent it out.
Ideally, you should opt for rentvesting only if you want to live in an area with higher property values and a prominent gap between mortgage and rent payments.
Some of the advantages of rentvesting include:
- Building wealth
- Cost saving
- Faster entrance to the property market
- Tax benefits
However, there are a few downsides, like having to deal with owning and renting costs at the same time. You may also lose access to homeowner grants. Rentvesting also means that you’ll continue to live in a rental property, for a while at least.
Nevertheless, if rentvesting seems like an attractive option for you, here are a few factors to consider:
- Rent where you want to live and invest for growth and cash flow
- Get the right rental outcomes to make it worthwhile
- Lease your property
Top Tips for Property Investors to Stay Financially Fit
As a WA property investor, here’s what you can do to keep your finances in check:
Prepare a Tax Depreciation Schedule For Your Property and Other Assets
This is a list of owned items and how they’ve depreciated from their value at the time of buying. Keeping records of your spending will make it easier for you to include them in your schedule.
Complete Repairs and Maintenance Before the 1st of July to Claim Against Them This Year
In 2023, make sure to carry out all of your maintenance sessions before 1 July to be able to claim against them.
There are 2 types of repairs: ongoing repairs and capital repairs. Ongoing repairs can be claimed in the same year. They include roof maintenance, door lock replacement, and plumbing work.
On the flip side, capital repairs are claimed over several years. Examples are property damages that were there before you bought the property and opting for full replacements instead of minor repairs.
Understand What You Can Claim
As a property investor, there are many things you can claim against, including:
- Some bank fees like loan interests, bank fees and mortgage discharge expenses
- Tax-related expenses such as quantity surveyors’ fees
- tenant services fees like audio, cleaning, and gardening
- Insurance costs, like contents insurance, building insurance, and public liability insurance
For more about the expenses you can claim, check out this article.
Talk to an Expert to Stay Financially Fit
Property experts can help you make the value of your property appreciate and report your taxes without hurting your finances. They also provide you with an end-of-year report that can help you file your tax returns more efficiently.
The Federal Budget 2022
The 2022 Federal Budget included new ownership initiatives in the form of expansions to the current Home Guarantee Scheme, costing an estimated investment of $8.6 million. These include:
- The First Home Guarantee. First time home buyers can get a home with a 5% deposit, and the number of annual places has increased from 10,000 to 35,000.
- The Family Home Guarantee. This initiative is designed to make it easier for single parents with children to find proper housing.
- The Regional Home Guarantee. A new addition that seeks to help buyers borrow up to 95% of the property value without LMI. The government guarantees 15% of the loan’s value.
The First Home Guarantee, in particular, is expected to have a significant impact on the property market in Perth.
More citizens can now buy properties, and the number of renters that will become house owners will increase, lifting the pressure off the city’s rental market.
On top of that, landlords in Perth have become more willing to get a professional rental appraisal to increase their returns and reduce vacant rental properties.
Understanding When It’s the Right Time to Choose a Property Manager
There are specific situations that necessitate partnering with an experienced property manager that has deep expertise in the property market in Perth, which include:
- Owning an investment property that’s held in a Self-Managed Super Fund (SMSF)
- Lack of effective communication from your current property manager
- Your properties have been on the market for too long
- Your current property manager can’t handle tenant resolutions
- You don’t have enough time to manage the property yourself
The Importance of a Regular Rental Appraisal
Conducting regular rental appraisals is essential for your property investment. Here’s why:
The WA Property Market Is Changing Quickly
The property market has never witnessed a long period of stability. In fact, changes in the property market take place from year to year and even from quarter to quarter.
Investing the time and effort to conduct in-depth market research and property appraisal is something not many property investors have the time for. That’s where regular professional rental appraisals can be beneficial.
Appraisers analyse the current market conditions and provide you with detailed reports about your property, as well as the recommended rental price for it.
Utilise Evidence-Based Decision-Making
Appraisal reports will help you make better decisions using actionable insights that are based on solid data, as well as build a strategy for your investment.
Moreover, professional appraisals give you access to a large pool of data that provides enough evidence to create an implementation strategy.
Maximise Long-Term Gains of Your Property Investment
If you don’t keep your rental prices updated, you’re missing out on a lot of money. Undercharging for rent can make you lose income while overcharging will deteriorate your relationship with your tenants.
An expert appraisal thoroughly inspects your property’s condition and provides an accurate estimate of the rental price you should charge.
Get a No-Obligation Rental Appraisal and Optimise Your Returns for 2023
Don’t miss out on any of the opportunities offered by this surging landlord’s market. Discover the difference an expert rental appraisal can make.
Contact us for a free appraisal today.