How to ask for a rent reduction
There have been considerable shifts in the rental market in the wake of COVID-19.
Lockdowns forced many city-based professionals to work from home, resulting in renewed perspectives on home essentials, like having space for an office set-up, room to exercise and proximity to public outdoor spaces.
Meanwhile, many workers in industries adversely affected by the pandemic lost income and had to seek out more affordable rentals or alternative housing situations.
All of this has contributed to significant rental drops in some cities, while other areas have seen price hikes. CoreLogic’s February home value index shows average rents in Perth and Darwin have risen over the last year by more than 10%, averaged across houses and units.
Meanwhile, rental price reductions are particularly evident in units in the larger capitals. CoreLogic’s data shows a year-on-year plunge in Sydney and Melbourne prices, with units down 5.6% and 7.8% respectively.
However, landlords have experienced a slight reprieve in January with the price decline slowing, particularly in Sydney which saw its first month-on-month rise (up 0.8%) since March 2020.
So, if you are a renter and your lease renewal is approaching, consider negotiating a better deal quickly in case prices continue to climb.
If you’re not sure how to approach a price haggle battle, follow the guide below:
4 steps to scoring cheaper rent
1. Do your market research and get specific
Approach your landlord or real estate agent armed with information on average rental prices in your area, as well as specific examples of advertised properties which match your place in terms of size, facilities and overall quality. This way, you can point to comparable cheaper alternatives you might realistically move to, hopefully getting your landlord to take notice and accept your requested rent reduction.
You can find specific examples via a simple search on property listing sites like Domain or realestate.com.au. Then, you can often find suburb-specific rent calculator tools on tenant union websites like this one for NSW residents, or by using national rental data from groups like SQM Research.
2. Have a back-up price
You want to be realistic with the new rental figure you propose, basing it on the market research you’ve done. However, it can help to leave a little wiggle room. Ask for a slightly larger reduction than you’re after, so you and your landlord can negotiate back and forth until you reach a final price you’re both satisfied with – this will show you’re a reasonable tenant while still getting you a solid rent reduction
3. Be ready to sign on for a set time
To secure the new price, you’ll often be asked to sign on for another six or 12-month lease. This ensures income stability for the landlord, but is also good for renters, as it locks in your newly reduced rent price. So, ensure you’re in a position to make that commitment, as breaking a lease can be costly.
4. Don’t be afraid to follow up (or leave)
Rental reduction negotiations can often run painfully slow, particularly if there’s an intermediary like a real estate agent who you rely on to convey messages. So, don’t be shy about sending a follow-up email or making another call if enough time goes by without word back from your landlord.
If you do eventually get a firm “no” on a price reduction, then you’ve got some thinking to do. If you are set on finding cheaper rent, make sure you factor in the costs and practicalities of moving, like hiring removalists, changing utilities and fronting up a bond. Having secure employment and an emergency savings fund can help make this a less stressful process and tide you over financially until your old bond is returned.
After a little more insight into how COVID-19 has impacted property and rental markets? Tune into this podcast episode of The Finance Burrito for all the details.