How is the rental price set?
When it comes to renting a property, the rental price is one of the most important factors for both rental occupiers and owners.
But how exactly is that price set? Well, it comes down to a number of factors including market conditions, current demand, and the number of similar properties available.
Here’s a quick explainer about how the rental price is set for a property.
The current market
The rental market plays a role in how much will be charged for the weekly rental of a property, and there are a few elements that determine the market, including:
- The supply of rentals and demand for them in a specific area.
- The vacancy rate at that time
- How many other similar properties are available
The vacancy rate
The vacancy rate varies from city to city and region to region, but is one of the key metrics a property manager will look at when determining the price a rental property will command.
In short, the vacancy rate indicates the percentage of all rental properties that are currently vacant and available.
In a balanced market, the vacancy rate is usually around 3 per cent.
Any higher than that indicates there might be more properties than renters, so a property could potentially sit vacant longer and command a lower rental price.
If the vacancy rate is lower than 3 per cent, it indicates a tight market where renters are competing for available properties and rental prices might be rising.
Supply and demand
Although the vacancy rate offers an insight into what’s currently available, property managers will also factor in how supply and demand for rental properties is likely to change in the near future.
For example, they might have a list of prospective rental occupiers that is long, but very few properties currently available or likely to be available in the near future.
This indicates demand is outweighing supply, and the price of a rental property might be raised as a result.
On the flipside, they might have an abundance of properties on their books, but very few people interested in renting, which would see rental prices lowered slightly.
Other similar properties
The rental price charged for other similar properties also plays a role.
For example, two bedroom units might be within one price bracket, but a four-bedroom home with two bathrooms would be in another.
Features and attributes
In addition to market conditions, there are the features and attributes of the individual property to take into account.
A property with a swimming pool and two-car garage would command more than a home with a small garden and on-street parking, for example.
A property management expert
Each of these elements goes into determining the rental price for a property, and a property manager is an expert in this space.
Not only are they fully abreast of market conditions, they are also aware of upcoming supply and demand, what similar properties are renting for, and the features that rental occupiers currently seek.
A key part of their role is setting the right price for a property, weighing up what people are likely to pay against the task of finding a good suitable tenant and maximising the return of the asset.
How we can assist
Our experienced property managers pride themselves on establishing great relationships with both rental occupiers and owners.
We manage every property as if it were our own and you can learn more about our property management services here.
Alternatively, if you are looking to rent a property, you can view the properties we currently have available here.
