As we draw to the close of another year we are starting to plan for 2019, and thought we’d keep in touch and give you a brief update as to what is happening with the rent roll market.
In review, 2018 has been a good year with the demand for rent rolls continuing to be strong in all capital cities and larger regional areas, and we anticipate that this demand will continue to remain strong into next year. Country areas as usual have struggled from lack of demand and can on occasions present a challenge to our vendors and us.
However, the elephant in the room… is bank funding.
Since the banking royal commission we have seen banks making it more and more difficult to obtain funding, and this is no different for rent roll funding which is classed as commercial borrowings and can be even more challenging. Even the Reserve Bank has hinted that the crackdown on housing lending could crunch the economy, so we hope that this could be a hint that the Reserve will stay alert to the dangers of regulatory over reach, and consider loosening up rules on investor lending. If they don’t include business lending then acquisitions and business investments will suffer, causing a drop in employment and business development which, may also badly affect the ongoing economy.
In 2019 prospective buyers will have to be prepared to jump through more hoops in an effort to obtain rent roll funding, and we anticipate that loan to valuation ratios will be lower that previously accepted. We know some banks are only wanting to deal with the larger more established agencies, looking for the quality, low risk clients, and even reluctant to look at transactions less that one million dollars in value.
This is the first year in ten years of operation where on several occasions we have had to go back to market due to buyers being unable to obtain suitable finance. So there may be some difficulties in 2019 brought about by the banks, which in turn may slow the market, and possibly affect the values being achieved. However, we know that there are always going to be buyers out in the market place, and they will be keen to take advantage of these situations, and use the opportunity to grow their businesses in difficult times.
As brokers we will have to become more diligent in assessing buyers ability to purchase prior to going to contract to ensure a transaction has a reasonable chance of being completed.
So, 2019 will possibly go down as the year that will provide some challenges for all of us. But, as in the past, there will be plenty of opportunities to thrive and grow our businesses.
We need to be diligent, think outside of the square and not be afraid to take some educated risks.
In the mean time if your thinking of buying or selling rent rolls please feel free to give me a call.
Here at The Rent Roll Broker we trust that you and your family will not forget the true meaning behind the “reason for the season” and make time to enjoy a wonderful Christmas and New Year together.