Australia’s island state has recorded the largest decrease in rental rates through July as tenants and landlords battle with the ongoing impacts of the coronavirus pandemic, according to property research group for CoreLogic.
- Hobart has recorded the sharpest drop in rents in the country, with units down nearly 4.5 per cent and houses 2 per cent
- Since March, rent for houses in capital cities only dropped by 0.3 per cent, with unit rents down by 2.6 per cent.
- The transition of short-stay accommodation into long-term, border closures and job losses contributed to the drop, CoreLogic says
As restrictions began tightening around the country, it had flow on effects with Hobart, Melbourne and Sydney recording the weakest markets for rent.
Since March, rent for houses in capital cities dropped by 0.3 per cent, with unit rents down by 2.6 per cent.
Hobart recorded the largest decrease, with rental rates for houses down 2 per cent and units down 4.4 per cent since March.
CoreLogic’s head of research Tim Lawless said weaker rental conditions can be found in markets where rental demand has been affected by border closures.
“There are a number of factors which are pushing rents lower in Hobart and we can look at the supply side, where at least anecdotally we have seen a lot of short-term rentals, like Airbnb, have transitioned into the permanent rental pool, simply because there’s not many short-term renters at the moment due to travel restrictions,” he said.
“Then on the demand side, we’ve also seen some disruption from rental demand from the weakness across those industries typically aligned with renters.”
Those services include food, accommodation, recreation and the arts, all industries that have been heavily affected by the pandemic.
Real Estate Institute of Tasmania (REIT) president Mandy Welling said it was likely that landlords were talking openly with their tenants either directly, or via their agents, to negotiate a decrease in rent.
“We sort of assumed the impact of COVID-19 would be much more severe than it has been so far, so for that we’ve been very grateful,” she said.
However, as Hobart’s rental market is among the most expensive in the country — relative to income — the issue of rental unaffordability remains.
Concerns remain for affordable rent
Shelter Tas chief executive officer Pattie Chugg said even before the pandemic, too many Tasmanians were facing homelessness.
“We know that people in Tasmania are on low incomes but we have the same rental levels as Melbourne,” she said.
“The other concern we have now with coronavirus and expected rises in unemployment is people’s ability to pay those rents.
“We know that with the rental freeze and the freeze on evictions, that’s been really helpful for people that may have lost their jobs.
“We know a lot of people have lost part time jobs, and what we don’t really want to see is anymore people in this state facing homelessness.”
A typical household in Hobart is paying over 30 per cent of their gross income to their landlord for rent.
REIT figures for the June quarter show the median weekly rental for a three bedroom home in Hobart was $495, Launceston $330 and $300 on the north-west coast.
“[A] 2 per cent reduction doesn’t equate to a huge reduction in money, I’m sure it’s all relative, so for some renters that is a decent saving to be had,” Mr Lawless said.
Despite many landlords in Hobart receiving less rent from their tenants, CoreLogic said they had not seen any evidence of urgent, or distress sales, coming on the market.
“Mortgage repayment holidays expire at the end of March next year and my guess is, leading up to that date, we probably will see a rise of those investors who have been impacted by their rental income, as well as their working income, looking to off-load their property simply because they can’t make the repayments anymore,” Mr Lawless said.
“But I think overall, considering interest rates are extremely low at the moment, a reduction in rental rates and rental income for investors is only just one element of the distress we are seeing across the economy at the moment.”
‘Still in a housing crisis’
There are concerns about rising unemployment levels in Tasmania and the impact income loss could have on homeowners, with about 8,000 households currently living in housing stress and 120,000 Tasmanians living below the poverty line.
“It would be a terribly sad situation if landlords were in a position where they could no longer afford their properties and have to sell them,” Ms Willing said.
“I stress that point because we are in the middle of a housing crisis still and we need these rental properties on the market.
“If they were to disappear, I would not like to see what our next six to 12 months would look like on the rental landscape.”
The decrease in Hobart’s rents comes after a period of rapid rental increases in the past five years.
Mr Lawson said Hobart’s rent weakness looked like a fairly established trend.
“Until we start to see more rental demand which means travelling is starting to pick up more so than it has currently, we see some tourism coming back into the market, that’s when we will probably start to see some of the permanent rentals reverting back into the short-term market.”