Austin’s population has grown 12.5 percent over the last 5 years, and the increased population brings with it an even greater need for quality apartment rental properties. This is good news for Austin property managers, who need tenants for their rental units. Learn what trends are shaping up for the Austin rental market in 2016 to stay ahead of the competition.
Increased Population Driving Rise in Rents
Austin has been growing rapidly in recent years, and 2015 was no exception. 2015 saw a spike in population of four times the national average. Austin also realized a 3.6 percent job growth, which offset concerns that newcomers would struggle to find jobs.
Perhaps in response to the population boom, landlords around the city increased rents in July 2015 alone by 5.5 percent, well above the national average. This represents the biggest spike in rental increases since December 2013 saw a similar increase in rental rates. In July 2015, Austin renters paid an average of $1,143, up $59 from one year before.
These figures came at a time when occupancy rates were up to 94.5 percent in Austin metro. As statistics show, the Austin rental market has more than rebounded from its slump in the last six months of 2014. If you have been thinking of raising rents on your rental properties, yet held back due to concerns over losing tenants, these numbers suggest it may be a good time to strike. Tenants who are aware of the tight rental market know they will have a difficult time finding another apartment to rent and may be more likely to opt to stay put during this rental increase.
Additionally, from July 2014 to July 2015, 10 of Austin’s 15 metro submarkets saw rent raises; the remaining five submarkets saw rents stay constant year after year. Seven of these submarkets actually had higher occupancy rates than Austin metro at large, which suggests that newcomers are seriously interested in property not just downtown but in the city’s submarkets as well. The Round Rock/Georgetown area had the highest occupancy rate (96.2 percent) as well as the largest annual effective rent growth rate at 7.8 percent.
New Construction in Austin Grows
As the city adds more jobs, the demand for apartments continues to grow. So it should not be a surprise that new apartment and condo complexes are cropping up around Austin. From January to June of 2015, Austin added 4,584 new apartment units; 2,897 were projected for July to December 2015. Projections suggest that 5,313 units will be added in 2016, offsetting the increased population and giving city renters added choice of living accommodations. These figures do include university off-campus student housing, so the actual figures of market-rate rental property are somewhat lower than the total of 12,794 new units for 2015-2016.
Still, the ratio of jobs created to multifamily apartment construction permits granted was 3.4 in June 2015. This means that for every unit of new construction apartment granted, there are 3.4 new jobs created. The ratio is still unequal, meaning that Austin landlords and property managers will continue to see high interest in their stock of available apartments for rent.
High Housing Prices May Keep Tenants Renting
Austin took top spot on Forbes list of America’s Most Overvalued Housing Markets 2015, followed by Houston in the #2 spot. Forbes found that Austin homes were overvalued by roughly 19 percent. Renters with an avid interest in buying a home in the Austin metro area may not be able to buy a house in the current rental market climate. As a result, a greater share of renters may be effectively locked in to renting until the housing market stabilizes.
Property managers who can make renting an attractive and smart option, through attention to detail and prompt managerial service, will help these long-term tenants remain happy in their rental units, even if renting is not their first choice.
As these trends show, the Austin rental market is and will continue to be hot in 2016. Active property managers wanting to offer excellent customer service, attract and retain high-quality tenants, and grow their management business should continue to follow these trends with interest.