Published on: 2009-11-05

Property Management 1/4ly Report

Property Management 1/4ly Report

Couple relaxingThe past quarter has proven to be the most optimistic for more than 15 months. Economies around the globe, including ours, have a common theme: Talk of ‘green shoots’ and a ‘u-shaped recovery’ is now fairly widespread, and it seems many economic and financial commentators are accepting proof that some countries are emerging from recession faster than expected. This has encouraged investment in markets across the board.

Despite these encouraging signs, it appears the recovery is set to be a long and grinding one, especially as Governments ease up on promised stimulus packages: This in a bid to cap inflationary pressures and recover debt.

The Hamilton residential rental market has held up relatively well through the recession. Although house prices were dented as the residential market subsided, it seems they have bounced back up for the most part. Meanwhile, rents for most properties in the majority of our suburbs continued to grow. Occupancy rates held strong as the Hamilton population expanded.

On the face of it, year-on-year data shows that rents were stagnant. However, a major factor that skews this figure is the high volume of properties that were unable to be sold throughout the depths of the 2008 winter. These properties were added to the ‘rental pool’. With demand now taking a firm grip over supply in the residential market once again, many of these properties have been sold and the pool of ‘to rent’ properties has contracted. As a result there is renewed upward pressure on rents.

Latest figures show the portfolio has a 98.7% occupancy. This is as strong as we have ever experienced. November will see a seasonal adjustment, as the student exodus frees up property. This trend reverses itself in January/February, at which time we expect to see additional upward pressure on rents.

While population growth has shielded occupancy rates from the recession, the vigilance of our property managers has shielded arrears. Increased unemployment and the erosion of people’s spending power have put the squeeze on household incomes. When times are tight, many tenants will typically reprioritise their rent payments in favour of other activities. This can lead to growing arrears and the neglect of basic maintenance (such as interior cleanliness and the upkeep of gardens and lawns, for example). Our experience is highly valuable here. The Lodge team is drilled to keep an eye out for early warning signs and act early. Our proactive approach to rent arrears is a major factor behind our excellent record with tenants paying in-full, on-time.

Further, we see inspection times as an opportunity to keep abreast of how tenants are feeling about their home – this is often reflected in how clean and tidy their property is presented. If a tenant vacates a well-kept and cared-for property, there will generally be a tighter timeframe between tenancies. This improves overall return, and eases any potential finance pressures for the owner.

The forecast is a good one for both occupancy and rental growth. In the upcoming quarter we’re looking forward to assisting our clients both protect and grow their wealth.