COVID-19 & The Sydney Rental Market

18 August 2020

Far out! The media reports are so depressing these last few months…

There have been endless articles and news stories covering the impact that COVID-19 is having and the Sydney rental market in general. Articles covering the drastic drops in rents, record vacancy rates, and how the tables have turned with tenants having the upper hand are a daily news feature.

If you know anything about The Management Agency then you know it’s me, Antonio, from start to finish and that means I’m the one taking enquiries and showing properties and therefore I see what’s happening on the front line.

We are undeniably experiencing higher than normal vacancy rates, rents decreasing and a general negative sentiment when it comes to the Rental market and particularly in the Inner-City Areas that The Management Agency works within.

However! What I see, is continued movement of available rental properties. Properties are still being leased and there are many reasons why tenants are moving around from Property to Property.

The Management Agency continues to monitor the local Rental Market & it’s activity and advises its landlords on the best courses of action in the current market.

So, what’s up?

Let’s get all that negativity out of the way;

Yes, it’s taking longer for Properties to get leased

There’s a huge supply but the level of demand is still typical of the winter months. Why? Because prospective tenants are shopping around, they have choice and most don’t need to move or necessarily want to move but they will to find a better deal. They all get leased, eventually!

Rents are certainly not increasing

They’re either at a standstill or decreasing to meet the current market. If the property (or Properties in some cases) are advertising lower rents to minimise vacancy then that’s pushing everyone else down. Meet the market or sit vacant and wait it out – neither are ideal options but these aren’t exactly ideal times.

Short Term Rentals are saturating the market

Whilst this has slowed down, most of these properties are offered as furnished rentals, creating an influx of furnished properties. The demand for furnished properties has never been typically high, even prior to COVID-19 and therefore some landlords have unfurnished their holiday rentals simply to get their properties leased. Some will stay in the long term Residential Rental Market post-COVID-19, but I believe many will return to short term rentals once the demand for it returns. The influx of these properties has added to the supply levels and therefore impacting overall Vacancy Rates and Rents.

On the plus Side;

There’s demand for specific properties

I’m finding that specific properties are moving a lot faster than others. These are the larger terraces or the smaller terraces and smaller apartments, due to generally being rarer finds so there’s a demand for these niche properties as they are meeting a specific need in the current climate.

For example, a 5-bedroom terrace can lease in a matter of days as it’s economically making sense for prospective tenants to combine households and pool their expenses into one home. Makes sense, right?

As for downsizers, with so many tenants working from home, a couple sharing in a larger property can make their own home by downsizing and achieving their goal of getting out of shared tenancies and at the same time finding good value and a quieter more comfortable home to work from.

As I meet prospective tenants, I’m hearing first hand of people’s circumstances, circumstances that simply make it an opportune time for them to be looking to make a move.

Price them right and they’re leased within a couple of weeks. Any property that’s well cared for, updated and most importantly, competitively priced has been snapped up either at or very close to the asking rent.

Prospective Tenants are on the Hunt

So many people that come through my Open House Inspections are simply looking to move to save money. They’re in no rush to move, they don’t need to move but will if they find the right property and the best possible value.

Considering that we all spend so much more time at home these days, and in the inner city most people are working from home, tenants simply want to be happier at home. Prospective tenants are looking for more space, workspace, and somewhere simply more pleasant to be than where they are now. The way I see it, many are currently in properties that aren’t meeting all of their needs and that’s what they’re on the hunt for.

Current Tenants are doing the right thing

Current tenants who are happy with where they live are staying put and those that haven’t been COVID-19 Impacted are fulfilling their obligations. The tenants who are impacted and are demonstrating this to us, are entering into negotiations with some good and fair outcomes being achieved. These outcomes are ensuring that we can keep tenants in their homes as well as give our landlords some income certainty. At the same time, these agreements ensure we all come out of COVID-19 unscathed, once it is finally, well and truly under control.

Properties are still selling

More than 12 months into trying to sell my property, it sold well into COVID-19. Who wouldn’t want an escape to the Southern Highlands right about now.

We’re seeing the inner-city market still moving with some notable sales results being achieved. By all accounts, a lot more stock is needed as many vendors are holding off until sentiment improves and potential vendors are more confident in achieving a positive outcome.

Rents will increase… eventually

Rents always do increase at some point! Obviously, we don’t know when it could be sooner rather than later. I’m sure we’ll all be watching this space and I’m sure the media will be reporting as much when the time comes. My clients can be assured that I always closely monitor the rental market and will be kept in the know.

Your Property Manager, Me, is on the front line.

Well, this only applies if I’m already your Property Manager. Having a poor negotiator or a Property Manager not doing their due diligence in these times is costly. That aside, I’m the one showing properties, leasing properties, and listening to feedback. I know what’s happening and this way my owners know what’s happening as well. Direct from the frontline. That’s positive!

So What’s next?

If only I had a crystal ball. I can’t say I know for sure but there are some signs of Rental Stock gradually reducing as rentals come into line with the market and then come off the market altogether.

What we really need is for our Students to get back to school, all of us to get back work and get holidaying groups back into holiday accommodation – as soon as it’s safe to do of course.

At any point in time, the market has its ups and downs and we always align to its cycle regardless, we just need some movement back into the workforce and back into the inner-city suburbs.

Until then, we have to keep on keeping on and move with the market. Support our current tenants to the best of our abilities, and try to keep our heads up.

For now, I’m done with the word “unprecedented” and sticking to “perseverance” because that’s what’s needed.

 

Antonio Mesiti is the Principal & Property Manager at The Management Agency, a local Property Management specialist offering a one on one and end to end service for his Property Investor clients. For more information visit; https://themanagementagency.com.au/about/

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