Now we have moved into a full-scale pandemic, COVID-19 is already starting to reshape Australia’s rental property market.

A decline in tourism shifts short-term rentals to the permanent rental market

One of the first things we noticed at rent.com.au was the quick shift from owners to move their short-term rentals to permanent residential properties. The recent announcement in New South Wales banning short-term holiday accommodation due to movement restrictions has fast-tracked this change virtually overnight.

As a result, we’ve seen many fully furnished rentals hitting the market. These former Airbnb/short-term properties will be a new challenge for landlords. Those property owners who previously experienced high returns must be prepared for lower returns offering their properties as permanent rentals.

To further complicate this issue, a lower percentage of permanent rental seekers are looking for furnished properties. While a furnished home can be attractive to first-time renters, homeowners having to sell and switch to renting typically have their own furniture and are looking for an unfurnished property.

Depending on the area and demand, ex-Airbnb landlords may need to consider offloading existing furniture to broaden the market for their property.

There could also be a risk to tenants who want long-term stability and lease tenure for these properties. When the war on COVID-19 is successful and the world economy improves, increased travel and tourism could open the temptation for landlords to flip these properties back into the short-term rental market. The reality, however, is that the downturn in international visitors could be 12 months or more.

Australia’s student housing market is likely to also see a similar impact. With travel bans affecting international student enrolments, there are tough decisions to be faced by providers of student accommodation as well as private student accommodation property.

While the length of the downturn in this segment isn’t expected to be as long-lasting, the sector will need to make a judgment call on whether to ride out the storm or abandon this market.

What goes up…

In times of high unemployment and market uncertainty, there’s a shift in demand from higher-priced rental properties to lower priced. This has an impact on the higher-end suburbs, with properties now potentially sitting vacant for longer periods.

Increasing demand for lower-end properties could potentially offset downward price pressure in this segment of the market. Overall, though, a fall in median rents is likely across Australia.

How much, and for how long the government and financial institutions are prepared to cushion the economic impact on both homeowners and investment property owners will be a key driver on the number of rental properties available on the market.

These are uncharted waters with no known end date. With potentially millions of people on social security support, preparedness to waive the normal safe haven of employed tenants may be important to ensure some income comes in for an otherwise vacant property.

There’s little doubt there are very challenging times ahead for tenants, landlords, and property managers alike. One of the hardest things for landlords to do is reset their expectations in these difficult periods. This, however, is a decision that could mean the difference between a tenanted property and a vacant one.


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