Rental markets Impacted by Covid-19

10 May Rental markets Impacted by Covid-19

3 min read

Core Logic has noted that with the full impact of COVID – 19 still to be felt, the effect on the property market is taking shape , particularly the rental market.

Prior to COVID – 19 the Australian rental market was already weak the impact of the virus has added to unemployment, our borders being closed and the overall economic impact is resulting in a rise in rental availability.

Rental supply has increased as people move in with their families to cut costs, the flow of overseas students into Australia is reduced , Airbnb properties move onto the long term rental market.  Combined with the completion of off the plan developments coming together at the same time will could see an oversupply of rental properties in  some centres. 

Tenants are renegotiating rents and we may see that rents will decrease

Core logic notes that the impact on cities / towns in Australia will vary depending how reliant the area is ion industries affected by COVID – 19 like tourism, migration and job losses. 

Core logic noted that across Australia between the week ending 22^nd of March and the 26^th April the number of properties available for rent increased by 0.8% .  However the big stand out was in the same period was Sydney and Melbourne where rental listings increased by 34.1% and 36.2% respectively.

Also in regions of Australia that are vulnerable to COVID – 19 job losses are areas where there are a high proportion of renters.  A recent ABS survey of employment changes found that -25.6% of jobs had been lost in accommodation and food services, -18.7% in arts and recreation and people in these fields of work are often young and renting.

The overall effect of the impact of greater supply on rental properties particularly in Inner Sydney and Melbourne and to a lesser extent Inner Brisbane and the inner West in Sydney, may see a sharp rise in rental supply.  The flow on effect from this will be downward pressure on purchase values, lower rental returns, and also an added risk for off the plan purchases that are close to completion.  For those people in stable employment who are renters may be able to get cheaper rental accommodation closer to the city. 

How might this impact you?  Some of the lenders have changed the LVR (loan to value ratio) for properties in certain postcodes considered to be higher risk now.  It is worth sorting out your finance plans as soon as possible if this is likely to impact you. 

Source https://www.corelogic.com.au/news/which-rental-markets-are-most-impacted-covid-19
ABS : https://www.abs.gov.au/AUSSTATS/abs@.nsf/mediareleasesbyReleaseDate/400084FDCC1353C9CA2585500026370F?OpenDocument