Rent prices tipped to drop 10% due to coronavirus
A recent survey by the St. George Bank Property Monitor found that as many as one in six Australians have changed their living arrangements due to the coronavirus (COVID-19) pandemic. People are increasingly moving in with family and friends, bringing in additional housemates, or seeking more affordable properties.
This has led to a surge in vacancy rates, a phenomenon that could see rents drop by as much as 10 per cent across Australia.
The state of the rental market
The latest quarterly report by Domain shows that median rent prices have risen in the majority of capital cities between January and March 2020. But gains could be short-lived.
|City||March 2020 median rent||QoQ growth (%)||YoY growth (%)|
There’s no denying the significant economic impact the pandemic is having – and will continue to have – on communities across Australia and around the world. But it’s not just job losses and financial uncertainty that contribute to an influx in rental vacancies. With travel restrictions in place and tourism at a virtual stand-still, owners of short-term holiday accommodation may be forced to transition their properties into long-term rentals.
According to SQM Research, rental vacancy rates could surpass 3 per cent. This, paired with shutdown measures, closed borders, and other restrictions, could cause rent prices to drop as much as 10 per cent nationally.
With investors thoroughly turned off, some economists forecast house prices to plummet by up to 30 per cent.
Spike in NSW tenants moving out
The number of renters leaving properties spiked in March, providing an early piece of evidence that rental prices are on the way down. Figures from NSW Fair Trading show that tenants in over 26,500 rental properties across the state got their bond back last month, a figure up 17 per cent on last year. What’s more, a significant portion handed back their keys within 100 days of signing their lease.
Discounted rentals begin to hit the market in NSW
Sydney landlords are beginning to discount their properties in the hopes of attracting tenants. Some are slashing rents by hundreds, while others are cutting prices in half for up to six months. Many newly listed rentals are offering two weeks’ free rent, especially in areas with an oversupply of apartments.
These discounted rentals began hitting the market after rules were put in place to protect NSW tenants suffering from COVID-19-related financial hardships.
Advice for landlords
A dip in rental price isn’t good news for landlords – at the end of the day, you are liable for all of the expenses associated with owning a property. Cutting your rent prices to meet the market could put you in a less-than-desirable financial position.
If you are suffering from financial hardship and have been forced to reduce rent, remember that you can contact your lender and organise a mortgage deferral. Deferrals can last up to six months, roughly the same period as the new COVID-19 rental rules.
It’s also worth noting the potential land tax incentives for landlords that agree to reduce rent price during the pandemic. Some states have introduced this support measure – take the time to research what you are entitled to and crunch the numbers.
Related: COVID-19 rent relief breakdown
If your property is vacant and you are struggling to attract a new tenant, aside from reducing the price of your rental or introducing incentives, be sure that your rental advertisement is well-written and includes as much information as possible. Adding video is a great way to attract suitable tenants in the face of open house and inspection restrictions.
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