The country’s rental market is shifting, and this could affect your rent roll. While demand for rentals remains strong, growth in rental prices has slowed and vacancy rates have started to edge higher in some areas.

After rising 8.1% in the 2023 calendar year, rental price growth nearly halved to 4.8% in 2024, according to CoreLogic. Additionally, SQM Research data shows that the national vacancy rate climbed to 1.6% in December 2024, up from 1.3% in December 2023.

While this trend is playing out nationwide, Victoria has been hit particularly hard as increased regulations and costs have driven many investors to sell, reducing the number of rental properties available.

According to Homes Victoria, the state lost 20,000 rental properties over the last 18 months, largely due to regulatory changes that have made it more difficult and costly to own an investment property. As a result, property managers are seeing rent rolls shrink.

For real estate principals who own rent rolls, these changes pose some challenges, making it more important than ever to protect and future-proof their rent roll.

The impact of the changing market on rent roll valuation

The value of a rent roll is directly tied to the stability and profitability of its income stream. When rental demand is strong and vacancy rates are low, rent rolls become highly attractive assets because property investors anticipate continued rental growth and strong returns.

Positive sentiment from these investors drives them to purchase more rental properties, and therefore the value of a rent roll increases.

However, a slower market can impact rent roll valuations in several ways:

1. Decreasing rental yields: If rental price growth stalls or declines, the revenue generated per property may fall, reducing the overall income from a rent roll.
2. Higher vacancy rates: More vacant properties mean reduced management fees, which can affect the profitability of a rent roll.
3. Increased tenant turnover: In a less competitive market, tenants may be more likely to move as they have more options, potentially leading to higher vacancy rates and reduced income. This increased turnover also adds to management costs.
4. Investor sell-offs: When they do not see suitable returns, investors may choose to sell. Properties sold to owner-occupiers are permanently removed from the rental market, further shrinking rent rolls.

Strategies to protect and strengthen your rent rolls

With market conditions shifting, proactive steps can help safeguard your rent roll and maintain its value.

1. Strengthen relationships with existing landlords: Keep open lines of communication. Regularly update landlords on market conditions, rental pricing strategies, and the benefits of holding onto their investment properties. Providing insights into potential capital growth and long-term rental demand can help counter their concerns.
2. Focus on tenant retention: Happy tenants are less likely to move. Clear communication, prompt maintenance and fair rental practices are important for building strong tenant relationships.
3. Diversify your portfolio: If you’re experiencing high investor exits in one segment of your portfolio, look for opportunities to expand into more resilient sectors. This could include targeting developers with new rental stock, marketing to long-term investors or increasing your focus on high-demand rental markets.
4. Consider acquiring rent rolls: While some agencies are seeing their rent rolls shrink, others may be looking to exit the market altogether. Strategic acquisitions can help grow your portfolio and offset losses from investor sell-offs.

If you’re looking to acquire a rent roll for your real estate business, Finance Advisory Co can help you secure the right finance. Contact Ben on 0426 236 007 or by emailing ben@finad.com.au.

Credit Representative 541104 is authorised under Australian Credit Licence 389328.  Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.