Landlords Disadvantaged by Residential Rental Crisis Measures

May 6, 2020 Updated: May 6, 2020

April saw state and territory governments implement measures to support the residential rental market through the economic downturn caused by the CCP virus crisis with most opting to put a moratorium on evictions for six months, following the national cabinet doing the same for the commercial market.

While governments are trying to strike a balance of interests and encourage good-faith negotiations between tenants and landlords, there are concerns landlords may end up bearing the brunt of the costs.

The Disadvantage for Landlords

Real Estate Institute of New South Wales CEO Tim McKibbin is unhappy with the rent waiver, saying landlords are subsidising the tenant’s occupation.

“The NSW Government has made it very clear that landlords are expected and required to ‘waive’ all, or a significant portion, of the rent due by the Tenant; and ‘waive’ is a good descriptor, because the Landlord is waving goodbye to the money due to them,” he said in a statement on April 27.

He said the majority of landlords are ‘Mum and Dad’ investors with just one property and a mortgage they can’t take a holiday from paying. Banks won’t waive mortgages, instead offering deferrals that come at a substantial cost.

“Landlords will still pay and pay it all, just a bit later on!” he said.

Nerida Conisbee, the chief economist of the REA group, said that while the six-month eviction ban has led to greater certainty for renters, it has transferred the problem onto investors.

“This health and financial crisis is also impacting the job of mum and dad landlords, so if they are financially stretched, we may see some property investors being forced to sell their properties,” she told Australian Financial Review on April 27.

Ray White group Head of Marketing Lisa Penne echoed Conisbee’s concerns. Penne believes it is critically important that the “needs of both tenants and landlords must be catered for in government policy.”

Her group has seen numerous instances of tenants who were not financially affected attempting to take advantage of this policy.

“Some states have not yet clarified rules around the moratorium on evictions, this is a problem as it cannot be a blanket ban without creating vulnerability for landlords and an unfair balance of power in the hands of tenants,” she told The Epoch Times.

Property Managers Under Pressure  

The government packages provide only a succinct guideline leaving agents to be innovative and proactive in how they facilitate negotiations and find solutions for their clients.

Real Estate Institute of Victoria president (REIV) Leah Calnan told The Epoch Times: “[Agents] have to spend a lot of time on the phone trying to facilitate the negotiation for both landlords and tenants.”

Suzannah Toop, the CEO of Toop & Toop group, the largest independent agency in South Australia, told The Epoch Times that its tenants and landlords were generally open to negotiating, and her team was dealing with every situation on a case by case basis to find a suitable solution.

“We have also launched an advice line should any tenants or landlords have any questions over this period, both within our portfolio and the wider community,” she said. “Our team are in constant contact with clients to see how they are going, and keeping our customers informed at every step along the way is incredibly important.”

Zoe Berardinelli, head of the property management department with Parramatta NSW Ray White Group said a number of tenants within their company’s rent roll had requested rental reduction, with some already owing rental arrears.

She said the company has set up procedures to assess on a case-by-case basis, and their job starts with qualifying those tenants. Those who couldn’t provide proof of hardship were rejected.

“They were requested to fill in financial hardship information form so that we can tell whether they are genuinely experiencing financial hardship,” she told The Epoch Times.

She said while most landlords are understanding and willing to offer rental reduction, some themselves are also under financial pressure, especially elderly investors who rely on rental income to pay for their daily needs.

While the overall performance of the rental roll is not bad currently, Berardinelli is most concerned over how the pandemic impact will play out in the long term.

“What we are at now is just an early stage,” she said. “If the economic fallout drags on for a prolonged period, this could end up draining the savings of people, both landlords and tenants. ”

Rental Market Outlook

Domain’s latest figures showed rental listings in most capital cities surged significantly during the three weeks to April 5 in comparison to the same period last year.

Hobart saw a staggering 60 percent more listings, Melbourne jumped by 20 percent, Sydney by 18 percent, Adelaide by 8 percent, and Brisbane by 7 percent.

Domain senior research analyst Dr. Nicola Powell said the surge of listings is largely due to the release of Airbnb and other short-term properties into the long-term leasing market.

Veteran property investor Peter Koulizos told The Epoch Times that some of his tenants, and those of his friends, were moving out because of financial concerns.

“Some have lost their jobs and are seeking to break their lease,” he said.“Some are choosing to move back to their family. Others are consolidating their accommodation situation and moving in with other people.”

Separate figures show that rental vacancy nationwide has lifted to 2.5 percent in April, compared with 1.8 percent a month earlier.

The two largest cities recorded their highest vacancy rate in three years, with Sydney sitting at 3.9 percent, up from 2.7 percent in March; and Melbourne rising to 2.8.percent, up from 1.6 percent a month prior. Vacancies in all the other capital cities recorded the same movement during the same period.

Hobart vacancies moved upward from 0.6 percent to 1.3 percent; Brisbane jumped to 2.9 percent from 2.1 percent, Perth rose to 2.4 percent from 1.8 percent.

Canberra surged to 2.4 percent from 0.8 percent, Adelaide rose to 1.2 percent from 0.8 percent, and Darwin lifted to 3.5 percent from 3.3 percent.

Rising vacancy rates point to rents falling in the coming months. Domain research predicts that rents are likely to fall most significantly in inner-city suburbs and holiday regions.