End of income support shaking up rental markets
As income support programs and rent moratoriums wind up, renters are left floundering while property owners continue to enjoy higher asset valuations.
A swathe of changes have hit the rental landscape in Australia in the past week, causing confusion and upheaval as jobs are lost, rents fluctuate and tenancy laws change.
Coinciding with the end of JobKeeper last Sunday was the end of the COVID-induced supplement to JobSeeker benefits.
Yet, as more than 2.6 million Australian lurch below the poverty line, property markets continue to surge ahead, oblivious to the serious rental stress befalling millions and the loss of income facing just as many.
Employers unable to retain staff began shedding jobs this week. This income shock arrived just days before the JobSeeker benefit was effectively cut by $100 per fortnight.
The end of rental moratoriums in Victoria, NSW and Western Australia on the day JobKeeper ended could see rents rise, with Perth rents tipped to soar by 20 per cent when many can least afford it.
In Victoria, an already complicated situation has been exacerbated by new rental tenancy laws featuring 130 changes to existing legislation, which came into force on Monday. NSW’s regulations focusing on eviction protection eased two days earlier.
In WA, there are very few properties available for rent and tenants searching for a rental are finding it increasingly difficult when the vacancy rate is at 0.9 per cent, the lowest in 40 years. Adelaide was an even tougher market for renters, with a vacancy rate of 0.7 per cent.
REIWA President Damian Collins said it was worth noting that although rents are going to increase in the short-term, WA tenants are still paying a lot less overall than their counterparts around the country.
“We remain the most affordable state in the nation, despite experiencing a rental shortage and record low vacancy rates,” he said.
“Ultimately, the rental moratorium ending is the first step to helping fix WA’s rental shortage.
“In the coming months we will hopefully see investor activity improve, which will increase the amount of rental stock available, reduce competition among tenants and create a more balanced market for both tenants and owners.”
Elsewhere in Australia, renters were faring better than those to the west, with vacancy rates at 3.3 per cent in Sydney and 4.5 per cent in Melbourne.
Shannyn Laird, Head of Customer Experience for property management company :Different, said the country’s two biggest markets should continue to be a renters’ market in the wake of terminated income support schemes, with flexible work options encouraging people to move out of CBDs and into regional areas like the Sunshine Coast in Queensland for example.
“If landlords in these markets find their tenants losing their income when JobKeeper ends, a temporary rent reduction might be the smarter move here,” Ms Laird said.
“Finding other tenants who can move into your property and pay rent quickly might be tricky, especially when there are currently more properties available than demand.
“Keep in mind the current renters market we’re in and explore finding a comfortable and fair agreement for all those involved, before making a rash decision that might impact your property investment return in the future.
“Another key thing to remember is that rent reductions only have to be temporary and when conditions are back in landlords’ favours rental increases can be made,” she said.
“Queensland, however, will continue to experience strong growth and migration and we also anticipate seeing more property investors consolidating their portfolios, selling properties and perhaps moving back into properties they own.”
Making ends meet
With eight property investments in Sydney’s vibrant inner west suburb of Newtown, 24-year-old property investor and developer Wahib Wehbe said the end of JobKeeper meant it was a time to be flexible in rent arrangements with tenants.
Two of his eight tenants sought help and rent reductions during COVID.
“Given everything that was going on in the world and both being long term tenants, offering a rent reduction made the most sense,” he said.
“Family and health is most important and by offering a rent reduction they were able to keep a roof over their families’ heads and enough food on the table.
“It also made more sense financially to lower their rent than potentially have both long-term paying tenants move out and me being left with potentially no rent.”
With reliable tenants not always easy to find, Mr Wehbe said he was open to similar arrangements with JobKeeper having ended.
“If any of my tenants need help, I am open to workshopping some arrangements and finding a middle ground with them that works for the both of us.
“This approach served me well during COVID and I believe will have the same result once JobKeeper ends too.”
Conservative estimates predict national job losses could range between 125,000 and 250,000 as the impact of JobKeeper’s demise takes hold, with as many as half of those job losses in Victoria.
Research by social enterprise Pro Bono Australia revealed that full-time and part-time single workers were able to afford weekly rent of $265 and $245 respectively before the withdrawal of JobKeeper. Afterwards, affordable rent fell to $115 per week, or about $110 less than the $450 median rent for a two-bedroom share house in Melbourne.
They found that these renters were left with only $17.57 per day to meet basic costs, a mere $3.57 per day more than they did before the pandemic, including food, utilities and job-seeking costs such as mobile phone plans and travel cards.
Property prices push on
The economic carnage wrought by the pandemic has not been evenly distributed.
For property owners who thought they were facing asset value collapses of up to 30 per cent, the reality has been far more upbeat than most could have imagined.
Dwelling prices have grown nationally by four per cent over the last year on the back of a 9.4 per cent rise in regional areas, and 2.7 per cent in the combined capitals, according to property data analysts CoreLogic.
“JobKeeper has already been reduced significantly in recent months, with no dampening impact apparent on the housing market as a whole,” CoreLogic head of research Eliza Owen said.
"Changes to JobSeeker would likely have little direct impact on housing market values," she said.
"With lower income households generally having lower rates of home ownership, it is more likely that households receiving JobSeeker are renters.
“This would imply an indirect impact on housing prices, where reduced rental return could impact an investor's willingness to pay for a property,” Ms Owen said.