What’s going to happen to the rental markets and vacancy rates as a result of the coronavirus pandemic?
Nationally the rental markets started the year strongly.
The latest quarterly Domain Rent Report, showed record rent rises in Sydney, Melbourne, Adelaide, Perth, Canberra and Hobart.
But this will now be short lived as COVID-19 impacts our housing markets.
The current lockdown, social distancing, travel restrictions, the shutdown of immigration and the return of many properties that were previously let as Airbnb to the rental market will lead to higher vacancy rates and rental falls of as much as 10% in some locations.
Vacancy rates around the nation
This was largely driven by rises in Sydney and Melbourne with the other major capital cities holding steady.
Year on year there were wide movements in vacancy rates across the capital cities as the table below shows.
But a rise in new rental listings in the second half of March in response to the Coronavirus induced economic downturn will push the rental vacancy rate higher across Australia in coming months.
Economic uncertainty will lead to more vacant properties across Sydney causing rents to fall in the coming months.
It’s the old supply and demand ratio… more properties for lease and fewer tenants looking for new accommodation.
To assist both tenants and property investors, the NSW government is looking into a scheme involving deferring or even waiving land tax for landlords, on the condition they pass on the savings to tenants, as part of its plans for residential rent relief.
Treasurer Dominic Perrottet said the states had been working on ideas for rent relief following this week’s national cabinet meeting.
“Offering a degree of land tax waiver or deferral for landlords is something we are finalising,”
Sydney’s vacancy rate remains the second highest in Australia, sitting at 2.7 per cent.
The current vacancy rate is 0.1% basis points higher than what it was at the same time last year.
Domain estimated that there were 14,528 vacant rentals at the end of March – 845 more than a month ago.
The Melbourne Rental Market
Melbourne’s vacancy rate rose in March according to Domain’s Rental Report.
Currently sitting at 1.6 per cent, the vacancy rate rose 0.1% by the end of March.
This was due to 583 additional vacancies across the city.
But the economic “hibernation” enforced by the government to halt the spread of the COVID-19 threatens to impact the Melbourne rental market for at least the next 12 months.
Domain senior research analyst Nicola Powell said that in Melbourne, the strong growth in rents was hiding the fast-approaching difficulties that would be faced by landlords.
“It’s [a new high] for units and house rents are back to the high they achieved in 2018,” Dr Powell said. “The surprise is that the unit rents continue to track higher, because there has been an apartment boom in Melbourne.
“The demand has really continued to outstrip supply.”
The Brisbane Rental Market
The latest quarterly Domain Rent Report, placed Brisbane as one of the country’s most stable rental markets up until March.
Domain senior research analyst Dr Nicola Powell said the call for foreign residents and tourists to return home amid the rise of desperate renters facing job losses had sparked the last-minute surge in rental vacancies with a drop in asking rentals destined to follow.
The Domain Rental report further revealed that as of March, 2020, Brisbane houses offered a gross rental yield of 4.6 per cent while units offered a slightly stronger yield of 5.4 per cent.
Brisbane’s rental listings rose 7 per cent from March 16 to April 5, compared to the same time last year, while across Queensland those listings rose 27 per cent from March 23 to 29, compared to the previous four weeks.
Dr Powell said the latest data indicated the state’s tourism hot spots would be hardest hit with first the bushfires and now the pandemic set to particularly affect rental markets on the Sunshine Coast, the Gold Coast and other tourist magnets such as the Whitsundays.
A raft of new measures aimed at protecting tenants and financially supporting their landlords will be introduced in Queensland.
The Queensland government will ban landlords from requiring tenants to draw down their superannuation or sell large personal assets like cars to pay their rent, and they will not be able to request personal financial information, among other measures.
Housing Minister Mick de Brenni said the current crisis was no one’s fault, and the new system would give landlords and tenants an opportunity to work out tenancy issues themselves.
This package was designed to bridge the gap and help renters waiting for their Centrelink applications to come through.
A one-off payment of up to 4 weeks rent (maximum of $2,000) will be available to eligible tenants who do not have access to other financial assistance, with the grant paid directly to their landlord.
To be eligible, applicants must live in Queensland, have a bond or shortly have a bond with the Residential Tenancies Authority, have less than $10,000 in cash and savings, and have applied to Centrelink for income support if they’ve lost their jobs.
Further, these tenants must have first tried to negotiate a payment plan with their landlord.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
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