Rental market in for a rough ride

EVEN if the rental property market boomed once the national lockdown was lifted, landlords would not be reaping financial rewards.

Both tenants and landlords have been suffering with reduced – or even lack of – earnings over the past few weeks, and the market has almost come to a standstill.

Rent collection has deteriorated as many tenants lose their income, and this has been compounded by the fact that tenants have not been permitted to move – apart from the one-month grace period announced last week.

This meant they faced rising rental debt, said Michelle Dickens, the managing director of TPN credit bureau.

Many landlords had offered a reduction of rent at a percentage equivalent to the loss of earning or a deferment of the rent and, in some cases, used tenants’ deposits for rent.

“The challenge post lockdown, when tenants are back to work, will be the collection of the additional monthly instalments of the deferred rent or deposit repayment because tenants will have to pay the usual rent plus these catch-up payments.”

She said post lockdown there would probably be more vacancies, especially in the higher rental brackets, as many tenants who had deferred payment of rent and other credit agreements would look to downscale

“Post lockdown, there will probably be more vacancies Michelle Dickens TPN

or find shared accommodation. The vacancies would probably limit rental price increases.

Further, the local rental market was predominantly serviced by micro-landlords, many of whom also faced full or partial loss of income.

“This, coupled with non-paying tenants and the burden of property expenses such as levies, rates and taxes and mortgages could result in many rental properties finding their way back on to the sales market as landlords are forced to sell.”

Tenants could take up to a year to catch up on their payments, said Lorraine-marie Dellbridge, the rental manager for Lew Geffen Sotheby’s International Realty in the southern suburbs. After that, those who could not pay would break their leases.

Landlords are going to have to “get real” about their price expectations, so she foresees a “sharp decline in prices”.

“At the same time, I think there will be a lot of urgent sales happening by landlords who can’t keep up with bond payments and those people will need to rent, so we will possibly see an increase in tenants.”

Dellbridge added: “It’s an extremely stressful period. We are putting together new agreements for payment arrangements daily. We have landlords who refuse to understand that we can’t do viewings right now, and we have landlords who are furious that new tenants have not moved in and, as such, have not paid the rent.”

However, Glenda Taylor, the rental principal at Greeff Christie’s International Real Estate, said the market would survive the challenges and become “very active” once the sector could commence business.

It was likely that most of the activity would be by tenants looking to downscale while the upper rental market stayed quiet.

Apart from Covid-19, she said the year started “very well”, with a “significant increase” in activity. But this was hit hard by the onset of the pandemic. “Recovery will take a while but the rental market is extremely resilient.”

After lockdown, agents were going to need to be very stringent on background checks, she said.