Rental listings are surging. What damage will it cause?
The rental market is tough.
It’s not a nightmare yet, but in some suburbs it’s headed that way.
Eliza Owen from CoreLogic reckons they’ve seen a huge surge in the number of rental properties available to rent.
In some inner-city areas, the number of listings is up over 30%!
Preliminary listings data estimates that between the week ending 22nd of March and the week ending 26th of April, the number of properties for rent have increased 0.8% across Australia.
But the most remarkable increases were in the inner-city regions of Melbourne and Sydney, where rental listings have risen over this short period by 36.2% and 34.1% respectively…
It’s backed up by anecdotal data from property insiders:
The president of the Property Owners Association of NSW, John Gilmovich, said the rental market was “very challenging” in Sydney’s inner suburbs.
“In a nutshell, 10% of the rental book is vacant,” he said. “Some tenants have just bailed out. They’ve broken their leases and handed back the keys saying they just can’t pay. Others have seen their leases expire and not renewed. The under-40s especially are moving back to live with mum and dad.”
He confirmed rents had dropped at least 10%, and in some areas as much as 15%, leading to a price war between landlords desperate to fill their properties…
The inner-suburbs of our major cities are facing a double-whammy.
First, demand is tanking thanks to the ban on immigration. The travel ban has prevented 75,000 Chinese students from studying in Australia. And that’s just the students from China.
We’re probably talking 1500,000 to 200,000 students from around the world.
Those students tend to gravitate to the inner-suburbs and university centres.
At the same time, many Airbnb rentals are making their way on to the long-term market.
We know that bookings on Airbnb have tumbled. According to analytics firm AirDNA, new bookings in Australia dropped from around 84,000 at the start of March to just 19,000 in mid-April. That’s a fall of more than 75 per cent.
The real estate platforms also reckon they’ve seen listings surge in holiday hotspots. Domain reckon that listings are up 73 per cent in Bondi Beach, 123 per cent in Byron Bay and 171 per cent in Surfers Paradise.
Those numbers are huge. They almost don’t make sense.
In the short term, this is obviously going to put downward pressure on rents in these areas.
There’s going to be some short-term pain.
Once the borders reopen, I expect this will quickly reverse. Listings will fall and rents will rise.
However, it all swings on when we can open our international borders again. We don’t know when that will be. But it doesn’t feel like it’s going to be soon.
This is going to be a challenging storm to ride out.