COVID killed the romance: a rental market story

Posted by Helen Matsoukas

Never before have couples and families been forced to spend more time with one another. While some relationships have welcomed and flourished during the forced lockdowns, it’s no surprise that others, unfortunately, haven’t.

It’s estimated that almost half of us have been challenged by the confining living arrangements during COVID-19. Relationship breakdowns are seen to be the key driver in the increased spike of search activity for one-bedroom accommodation.

According to a recent data release from REA, search inquiries for one-bedroom apartments increased substantially in May – some 6 weeks after the initial lockdown. We’re not talking about a slight increase; we’re talking about a staggering 91 percent increase compared to May 2019 and the interest continued to remain solid for June.

Whilst we are seeing a current interest in one-bedroom accommodation, the romantic in me is hopeful that it’s also due to couples downsizing and on the lookout for cheaper rent, we do know this is a temporary measure with most tenancies in one-bedroom accommodation lasting anywhere between 8-15 months.

So what does that mean for our 2 bedrooms plus accommodation? Are they the sole cause for our vacancy spike? Not likely.

We know that both Melbourne and Sydney recorded significant increases in vacancy, especially in and around CBD postcodes. These increases, however, are heavily impacted by the influx of Airbnb and holiday accommodation forced to join the long-term letting pool.

Despite the easing of restrictions, not much has changed. International students are still international and with borders (abroad and most nationally) remaining closed, the supply of tenants just isn’t there. Couple that with the disruption of employment, people being forced to move back home with parents or further out of town for better affordability, and wait for it, postcode restriction lockdowns, there’s your vacancy spike.

What we can tell you, is that despite the negative nelly output on vacancy rates, a number of our clients are achieving stable rental yields and interest remains steady for a number of our projects nationally. Let’s take Woolloongabba for instance, despite the Keep Out! order and the never-ending reel of articles literally yelling (with CAPS ON) that Brisbane as a whole is VACANT!, it’s recorded a positive 9 percent change in rent over the past 12 months. And Bellaire, our most recent project in Mitchelton which settled in the throes of the pandemic, saw our clients achieving more than 4.8% yields. Rental vacancies in Mitchelton couldn’t contrast more with what’s happening a few kilometres down the road in Brisbane CBD.

For the vast majority of our clients, they are working together with their property managers and are remaining focused on negotiating tenancy terms to avoid joining the vacancy cluster. Adjusting rents, payment plans, clever incentives are all out on the table to get things done and if your tenants happen to move out because COVID killed their romance then those properties are merely taking 2, possibly 3 weeks longer to source new occupants.

We’re not naive to the fact that some areas are experiencing this vacancy spike and tenants are certainly taking advantage of the ‘rental deals’ that are out there but we are slowly starting to see the catch-up. Demand is slowly starting to catch up with the supply that’s out there.

Posted by Helen Matsoukas, on 7th Jul 2020