As the rental management industry moves forward on a quicker timeline, it’s important for property managers to develop a strategy to anticipate what’s ahead, in order to be able to respond long before events play out.
The trends discussed previously have deepened. And other changes, challenges and opportunities are slowly evolving but will be a fixture for any property rental business in the next five years.
Macro and micro trends make it complicated
There are micro and macro trends posing challenges for property managers looking to scale up or optimise their current business operations this year and into 2023.
Issues such as acquisitions, inflation, work from home, hacking threats, lack of affordability, and rent controls are upon us. The fallout from these will increase the business challenge for property management companies.
Acquisitions will pick up as smaller landlords run into financing, churn, and eviction issues as interest rates rise. Any recessionary activity will only increase pressure on landlords, cash flows and balance sheets. Already, employment and wages are under significant pressure.
Smart management through technology is another trend we take for granted. Next generation property management software is encouraging more digital adoption this year.
All-in-one platforms offer workflow optimisation allowing property management companies to scale up to achieve profitability.
24 current trends and more coming
The trends of inflation, rising financing costs, higher labour costs, and rent price trends are big news right now. Were you ready for them and are you handling these reasonably well? Adopting a great property management software platform is a trend, yet you’ll need new managerial skills and the ability to foresee these immense challenges so you can avoid profit destroying consequences.
Studying the trending news and technology
A lot of people take a light interest in trending market changes such as demand outlooks, price trends, new technology, and more, yet don’t act on that knowledge. 2022/23 will be a year of asking good questions: how best to deal with challenges of taxes, renter migration, economic swings, and more.
- Should I buy or manage more rental properties?
- Should we raise tenants rent price to recover pandemic losses and inflation this year?
- Should we investigate additional digital amenities and services?
- Is this the wrong time to upgrade/renovate apartments and houses?
- How can the company capture more leads when property stock is low?
- Is a recession just ahead and how do we minimise risk and hedge our assets?
- Are remote at-home work styles going to persist and is there a way to capitalise on that trend?
- How can you automate more work?
- How much do prop tech amenities/services affect the choices of younger rental prospects?
24 property management trends
1. Management efficiency:
Reductions in staffing, cash flow, revenues, and rising overdue accounts receivable means having to run a property management business efficiently.
2. Business growth:
Whether by design or growth hacking, some landlords and property management firms will be intent on growing a little. Many expect some challenges, but as the economy picks up through 2022/23, opportunities will grow. There are many reasons why landlords decide to change their property management service provider. The trends discussed here might be why.
3. Focus on tenants:
Efficiency, growth and profit were the previous top goals pursued, according to surveys. Yet 2022 is a much different year, and 2023 could be a turn the other way. Smart property managers are working on better tenant advertising, screening, and creating an enjoyable tenant experience. Landlords expect better results from being careful about tenants they rent to.
4. Rising taxes and closed loopholes:
Governments facing rising costs, higher borrowing costs and materials costs, along with rising wage costs will need to charge more income and property taxes. They will also make changes to prevent tax evasion and to capture more revenue from real estate. In high tax states, the coming rise in taxes could threaten many landlords.
5. Renter migration:
The migration to lower rental areas, along with work from home workstyles has changed the demands of renters. Renters want more room, lifestyle, amenities and high-speed Internet so they can work and live in the same space without sacrificing their health too greatly. Landlords who cater to their needs, stand to enjoy strong demand and higher rentals in 2022/2023.
6. Choice of location:
In past markets, renters who were financially enabled had a choice of where they might rent – now renters are scrambling to capture slim pickings. Work from home scenarios have also contributed to high levels of interstate migration.
7. Technology and automation trends:
New cloud services, Internet-connected devices, and automated services have arrived, and property managers and tenants like (and demand) them. In fact, the work from home trend goes hand in hand with Proptech tools. Everyone needs the cost-efficiencies of remote work, and high-speed bandwidth are a part of it. More fibreoptic service is being implemented in neighbourhoods, which will work well for property managers and their distributed staff.
Virtual showings, web-based services, tenant apps, online rent payment will ease workloads for busy property managers. The era of virtual property management is well underway.
The demand in 2022/23 is for all-in-one cloud-based platforms that are easy to learn and use. Full SaaS platforms aid in workflow automation, meet changing rental regulations, optimize financial management, and offer lease driven accounting and expense management which reduces administration.
8. Demographic trends:
Millennial and Gen Z tenants are comprising more of the tenant market, and they want high tech digital solutions. Without the technology, they consider a landlord backward or irrelevant. Landlords as well, choose property management companies based on tech expertise. Without technology, a property management firm won’t possess the efficiency, competence and capacity to scale up to allow owners to achieve profitability.
9. Rental market supply and demand:
Housing construction starts will grow again as the economy reopens, with more detached homes for rent and apartments and for the next five years.
In the major cities, apartment rental demand will increase, and occupancy rates will likely shrink further. Workers quitting jobs and migrating to warmer (and potentially more Covid-safe) will mean challenges for the cities they leave behind.
10. Rent negotiation:
The market could be divided into two sectors: those who can afford rent and those who can’t. More highincome renters will appear, and they’ll be willing to pay much more. Yet they’ll want better services and amenities whether in a house or low-density townhouse/ condo or apartment situation. There will be more rent negotiation, especially as renters threaten to move out in 2023. Landlords and property managers will have room to negotiate higher rents in exchange for improved amenities.
11. Returning economy and trade tariffs:
The pandemic was a tough time with massive unemployment in Australia, US, UK, Germany and Spain. The tourism, restaurant, and entertainment sectors are slowly recovering, and tenants will be more reliable with paying, and rents will need to adjust.
12. Government restrictions:
Given how high housing prices are and how high rental prices have become throughout the country, the cries for rent controls will get louder in 2022/23. Restrictions on rent payment increases and eviction moratoriums will continue as rent prices potentially rise beyond what the market can afford.
13. New construction trends:
Besides big growth in new construction, new Labor government programs may impact future rents and income potential. Large multifamily buildings will come back once Covid 19 is diminished, however developers will be offering huge concessions. Big developments near key transit locations will receive priority from government.
14. Interest rates and inflation:
Financing, wages, utilities, and operating costs are already on a steep incline. Smart financing will play a bigger role for larger landlord portfolios and property management service firms may see budgets shrink against rising business costs. Smart property management service fee designed and negotiated will help ease inflation losses.
15. SaaS software technology:
Automation is the big ask in property management this year. Managers will need to get tech to do more to ease their rising workloads and to scale up their business. New cloud-based SaaS software technology is delivering the desired capabilities. Managers will see further improvements in property accounting, time management, tenant screening, virtual leasing, online payment, property maintenance and repair services. Some offer complete solutions while some with little more than simple apps are found inadequate.
16. Demographic shifts:
Baby boomers are finally retiring, and the Millennial generation is out of their parents’ homes and into renting their own apartments. Some renters will continue migrating out of the cities to rent more roomier houses. The rental products and management style will gradually be reshaped to suit them in 2022/23.
17. Start-up property management companies:
As with most industries, the property management sector isn’t immune to a surge in accidental landlords. Buying rental income properties is popular and many are realising there can be big money in property management. These operations will need to be cautious and learn quickly that property management automation and growing their portfolio are keys to operating a successful property management company.
18. Industry consolidation:
Large property management conglomerates are entering the independent property rental market. What are they looking for in properties or in property management companies they’d like to acquire? What services will they offer (e.g., maintenance). Will investors be a threat to the rental market sector?
19. Property management specialisation:
Given growing complexity in PM licensing requirements, government legislation, lender regulations, insurance requirements, environmental constraints, and accounting and taxation property management professionals have begun to specialise.
20. Rental property insurance:
Changes in legal liability mean more renters should have their own renters’ insurance, and they will. Yet, fraud is prevalent, and premiums are rising fast in some regions. Similarly, landlords will also need to be sure of their own landlord insurance. Is insurance coverage for them a value-add for your property management company?
21. The shift to smart buildings:
Digital amenities including keyless entry, 5G and free wifi – these are some of the benefits that tenants love. Large portfolio managers may want to consider upgrading services and providing free wifi or create it as an affordable option for tenants.
22. Smart locker storage:
We’re in the era of online shopping, and tenants will need some way of accepting packages at their apartments, many of which don’t have suitable storage. Smart lockers allow them to pick up parcels when they can. The tenant receives a digital message and can unlock code on their smartphone. Yes, another app.
23. Property management marketing:
Given the complexity of property management today and how new client opportunities are happening as landlords scale up portfolios, property management companies realise that they have to market their services better. Otherwise, competitors will gain market share. Some will turn to lead generation and brand building strategies, using social media advertising and content marketing on their website, the best companies will be making noises this year. Building a brand and communicating services will drive new business in growing markets.
24. Greater demands from owners:
Owners will continually compare services to see what is available via other property management services companies. They’re looking for better financial reporting, help with rent collection and evictions, and advice on financial management. Ever improving technology is the asset that gives property management firms a competitive advantage. Continuously applied, it pushes the modern organisation ahead one day at a time, until competitors simply can’t keep up.
