The rental market is about to get tougher

How COVID-19 is having serious impacts on the Sydney rental market

BresicWhitney will lease more than 100 properties in April – a tough feat.

And it’s going to get harder, with another surge in vacant stock coming.

Last week 33 households advised that they need to vacate across our offices, together with 10 households who entered into a break of lease agreement. These 43 homes will enter the market in 21 days.

This will likely continue as more people make the decision to vacate, either due to financial reasons or because they can secure another property that represents more value.

This is the part of the jigsaw where listings are waiting in the wings, with tenants who intend to vacate, but aren’t online yet. Those homes are usually advertised the moment tenants give notice, but that’s not happening because of COVID-19, as we wait for them to vacate first.

Make no mistake. The bottleneck of vacant homes in Inner Sydney continues to build.

Comparing it to the norm

Usually our vacant properties make up around 2% to 3% of our portfolio. At the moment, our vacancy rates have increased to around 5%.

In mid-March we had 70 vacant homes. That’s jumped to 90. In 2 weeks it will be 120.

In a space where many business cut costs and human capital to protect profitability (especially when COVID-19 hit), we’re lucky to have existing resources and framework to ensure owners can achieve results in these conditions.

What it means if you’re listing

Depending on what else is in the market, prices need to be sharp and enticing when a new rental home is launched. A quick search of properties in ‘Darlinghurst and surrounding suburbs’ (as one example) reveals 3000+ properties offered online.

New listings will be up against those homes already in the market, while negotiations that fail between landlords and tenants may proceed down the same vacating route in the coming weeks.

And this will be most prevalent in the inner-city.

The homes most affected

If landlords own a classic share-living house, or big city terrace house, many of those residents are no longer around. The sharers are gone, made up mostly of casual and part time workers.

Some of them have opted to leave Sydney, move in with family, or back to their home state.

We’re now seeing singles, couples and families enter this space. They’re downsizing, looking to save money, and properties need to be priced to engage that audience.

Looking at the one-bedroom apartment and studio market, thousands of offerings are creating competition online right now.

And long-term rental homes are doing it tough. If a space is tired and hasn’t been touched in years, the benchmark they’re measured against has lifted too. Tenants are comparing these homes with the modern apartments that flood the inner city, and they are responding to the best-finished offerings.

Landlord and tenant relationships

We’re seeing a mixed reception to discussions between tenants and landlords. Some landlords can afford some flexibility. Others have assets, but not cashflow. 

Many landlords have come forward to check on their tenants in advance, being proactive with negotiations.

One landlord got in touch to offer a rent rebate to their tenant who is a nurse.  They wanted to say thank you to her for her service on the front line.  

Any property owner with good tenants in place, will know that the best approach in these conditions is to keep their residents wherever possible. 

Keeping you updated

Amid all this unpredictability one thing is certain: it’s going to get tougher for homeowners before it gets better.

More to come as it changes, from BresicWhitney.

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