Rents fall as landlords struggle to fill vacant properties during Australia's coronavirus crisis
Tenants are in a better position to demand lower rents than they have been for years as the devastating impact of the coronavirus crisis leaves landlords desperate to fill vacant properties for “whatever they can get”.
Figures released on Wednesday showed that rents for houses in Sydney have fallen to their lowest point since 2013 thanks to the Covid-19 triple whammy of economic standstill, lower migration and a flood of former Airbnb lettings left empty by the wipeout in the travel industry.
It now costs on average $646 to rent a house in Australia’s biggest city, according to the latest figures from SQM
Research, the cheapest level since 2013 and a 6.5% drop from a year ago. An average unit is $480 a week, the lowest since since May 2015.
Scott, a tenant who was looking to upgrade from his one-bedroom apartment in Rhodes in Sydney, managed to secure a 15% reduction in his rent from $540 to $460 a week after noticing that the asking price was falling in many apartments in his area.
“I was upfront with the real estate agent about the situation,” said Scott, an IT manager. “I linked them to various apartments within the same complex in the $450-480 range before reaching an agreement of $460 on a 12-month lease. It took about four rounds of negotiation to get to that point – the owner was in denial for a few weeks about the state of the rental market in Rhodes.
“There have been a few ridiculously cheap listings on three month leases – as low as $300 – just to get a tenant in.”
Rents have not fallen so quickly in Melbourne in the SQM data series. But tenants in Victoria who have struck agreements with their landlords to drop their rent amid the effects of coronavirus are paying 31% less on average, according to consumers affairs data revealed to a parliamentary inquiry on
Tuesday by attorney-general Jill Hennessy.
Jade Costello, co-founder of the agency Melbourne Rental Search, said she was seeing something “we’ve never seen before” with landlords willing to negotiate on the price upfront.
“You might see somewhere for $500 but the landlord will be willing to drop it because they just don’t want places to be vacant,” she said. “It’s a tenant’s market for sure. For the time we’re seeing tenants having the power of negotiation. They are going in with the
rent they want to pay and landlords and agents, who used to have so many potential tenants to choose from, are saying whatever we can get we will take it.”
A couple were moving to Melbourne from interstate and were offered a place for $800 a week, she said. But they asked for a $20 reduction per week and it was granted straight away despite the listing having been up only a few days.
The potential for the weakness in the rental market to spread into the housing market remains significant. In the latest sign that prices are under pressure, the research firm CoreLogic said on Wednesday that it was suspending the daily online publication of its closely watched index of house values due to the Covid-19 crisis.
CoreLogic blamed “material reductions” in transactions which had in turn created “additional volatility in the daily reading”.
“A robust volume of timely sales evidence is a critical component of accurately estimating the value of residential properties,” it said. “The monthly results of the index will continue to be reported, but should be interpreted with some caution until transactional activity returns to more normal levels.”
Louis Christopher, founder of SQM, said the economic uncertainty, rising unemployment and closure of the international border due to the pandemic would continue to put pressure on the housing market.
Some investors might come back into the market despite falling rents, but there was a lot of doubt about how soon the normality could be restored after the current shock.
“Its hard to see it coming back to normal and hard to see a full V-shaped recovery in the economy,” he said.
“When is that international border opening again? You’re looking at zero net migration and with 170,000 dwellings being completed in Australia this year, the domestic demand is only 70-80,000 so without migration there’s a 100,000 surplus. That’s a reality for builders.”