The short answer to this question is in most cases, YES!.
The longer answer is, the Melbourne Inner City rental market has softened, we will see more softening as we move through Winter 2014 before it begins to improve again in Spring 2014.
“We can see from this that the city of Melbourne’s rental market is starting to reveal signs of strengthening, after a long period of elevated vacancy rates in comparison to other capital cities. However, we do note that Melbourne CBD continues to record high vacancy rates (postcodes 3000= 4.7%, 3006= 4.9% and 3008= 4.5%).” Source REIV (Real Estate Institute of Victoria
The market that we’ve noticed is worst affected by the softening is the furnished market. Vacancy periods are stretching out, rents achieved are falling and lease durations have shortened leaving landlords facing the vacant periods again more frequently. It has become a much more fickle market as we saw 4+ years ago.
Many of our landlords are not wanting to part with their furniture, and whilst there is nothing wrong with that in principle they need to accept the reality of less rent, shorter term leases and longer periods of vacancy. When you look at it as an overall investment proposition when you have the added cost of maintenance of the property and furnishings we are surprised by the decision in many cases, it certainly doesn’t seem commercially viable to us.
Let us show you a few recent examples. All of these examples had previously leased without delay as furnished apartments at the rents we were asking below.
|Address||Furnished Situation||Unfurnished Result|
|8 Wellington Cres East Melbourne||Partially furnished asking $615pw. Vacant 5 weeks.||Removed furniture. Leased in 2 days for $650pw.|
|25 Hotham St East Melbourne||Fully furnished asking $270pw. Vacant 2.5 months.||Removed furniture. Leased in 1 day for $290pw.|
|100 Harbour Esp Docklands||Fully furnished asking $500pw. Vacant 4 weeks.||Ran an add at the same time for property unfurnished. Leased unfurnished in 3 days for $450pw.|
|87 Franklin Street Melbourne||Fully furnished asking $460pw. Vacant 2 months.||Removed furniture. Leased in 1 week for $440pw.|
We have made recommendations to several owners to remove furniture, particularly where the furniture is becoming older or outdated.
There is still a need for furnished apartments but with so much competition the furniture and additional items need to be to a very high standard and quality to attract corporate tenants. There are also a number of companies now offering fully furnished properties which include concierge services and weekly cleaning etc making the furnished market even more competitive. They lease durations with corporate tenants are still often 3 & 6 months due to the nature of corporate relocations.
Properties that have lower quality furniture (often second hand – hand me down type furniture) will attract a poor quality tenant. This leads to a whole new range of problems and is a scenario best avoided.
The most important thing when considering it it’s time to remove your furniture is to listen to the advice of your property manager, they are here to help and offer advice and chat through your options.
If I can be of assistance you can also contact me for help or advice.
Dionne Wilson – Director, Harcourts City Residential – 03 9664 8100 (Option 2)
……….Below are some good examples of properties that have continued to lease well as fully furnished properties. The owners regularly replace all linen and regularly replace things like saucepans etc that have started to look old and tattered.