Rental market takes a hit from COVID-19

It’s impossible to tell what the future holds for Australia’s property market amid the rapidly evolving pandemic situation. But we are starting to see a change in dynamics on realestate.com.au, and it appears the rental market is the first to be hit.

The Federal Government is currently in discussions with state and territory leaders about model rules for landlords and tenants in the current climate. A decision is expected in the coming days.

But for now, search activity for renters is unstable.

Job losses are having an impact

The one major influence on rental activity is a change in employment conditions, and we’re now clearly seeing COVID-19 impacting the rental market. Search activity from renters is down over the past two weeks but it is also down year on year. This is unsurprising given that most renters are young and fall into the low-income bracket.

Renters are also often casual workers and are most likely to be exposed to the industries that have been hit first by this pandemic; hospitality, retail, entertainment and travel.

Interestingly, and perhaps again unsurprisingly, there has been a lift in activity on sharehouse platform flatmates.com.au. Sharing makes sense when your income takes a hit.
 

Rental listings are on the rise

The other indicator we’ve been monitoring is listings, and currently the number of rental listings is rising. This is partly because many homes that were rented out as short-term accommodation are now being listed as long term.

Compounding the issue is a drop in demand; more renters are moving to share accommodation or moving to live with family. We don’t know what will happen to rental prices just yet but it’s likely prices will fall.
 

The buyer market is still buoyant

While the rental market is starting to show signs of the impact of COVID-19, the buyer market is holding up relatively well, for now. Search activity has slowed over the past two weeks but it is still well up compared to the same time last year.

While buyers are stressed by COVID-19, they are not as negative in sentiment towards property as they were in March 2019, which was when we were in the midst of the Financial Services Royal Commission and there was a lot of uncertainty around who would win the Federal election.

The reason we’re still seeing high levels of buyer interest and activity on realestate.com.au is likely because interest rates are incredibly low and access to finance is good.
 

Property is a safer gamble

While property will be impacted over the next month, it is still generally considered safer than the sharemarket, which continues to show incredible amounts of volatility. As yet, we are not seeing distressed sales, likely because most banks are now offering six-month mortgage repayment breaks to people impacted by COVID-19 job loss.

Property owners and buyers are showing positive signs, all things considered. However, sentiment is likely to change over the coming month. Investors without a tenant may struggle to pay off loans, and as unemployment rises we might start to see distressed sales occurring.

For now, it is too early to tell what the ultimate impact on the market will be.