September 28, 2020
The effects of COVID-19 have begun to filter through the property and housing markets, with house and apartment prices weakening nationally over the June quarter.
According to the latest Domain house price report, house prices dropped by 2.0% and unit prices by 2.2% nationally over the quarter.
Every major capital city saw unit prices fall while only Adelaide, Canberra and Hobart experienced an increase in house prices.
Domain senior analyst Nicola Powell said price falls to date had been minimal from the pre-coronavirus March quarter to June with significant government stimulus, mortgage holidays and low interest rates supporting home values.
“Price expectations have changed rapidly in recent months, with more vendors adjusting asking prices downwards to seek a timely sale,” Ms. Powell said.
“With lenders extending mortgage pauses for those under serious financial strain, and the JobKeeper subsidy being extended, the outlook for prices largely depends upon how well the economy is tracking when fiscal stimulus ends.”
While renting listings are no longer increasing across the board, the unit sector is suffering with more than 16,000 units up for rent compared to mid-March 2020.
The biggest increases in rental listings have been in areas where universities are close by or young people, as most of these demographics have had to leave their rental properties as they could no longer afford it.
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The outlook for unit markets in some areas look even more bleak than before the health crisis. Particularly the suburbs in Western and South Western Sydney, which are now seeing the lowest views per listing across all rental listings on realestate.com.au.
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Unit prices fell modestly over the June quarter for Sydney, Hobart, Canberra. The housing market continues to operate on different speeds, however. Hobart and Canberra have still been positively impacted as the median house prices increased rather than decreased.
The coronavirus crisis has forced some young renters to vacate their homes, as data from Flatmates.com.au has shown an increase in vacant room listings alongside a drop-in flatmate enquiry since the crisis, leaving some renters caught in-between. Due to job losses and financial hardships and an exodus of foreign students has left rentals vacant.
Some tenants went to zero income overnight and had to wait two weeks for the Federal Government to announce its JobKeeper and JobSeeker schemes. Many unemployed tenants were forced to leave their rental homes because they could no longer pay rent, and vacant properties began to flood the market.
Since the start of the pandemic, the conditions have been improving in the rental market. According to realestate.com.au, search activity is now up more than 50% since the lows experienced. While this is welcome relief to some landlords that have been struggling to lease their vacant rental properties, there are parts that still remain very weak.
With many tenants across Australia facing great financial uncertainty due to the COVID-19 restrictions, moving back in with mum or dad, or with friends or family, may seem safer than maintaining a lease.
The rental market conditions have become highly varied nationally and the median rent for capital cities in Australia have either stayed stable or decreased. According to Domain’s Rental Report for the June 2020 quarter, nationally there was a 3.2% decrease in unit rent prices and a 1.2% drop in rent prices for houses.
Rental rates continued to trend lower in July, with the weakest conditions found in Hobart, Sydney and Melbourne. The unit sector drove the biggest falls.
Nationally, the median house rent price sits at $446 and the median unit rent price at $447.
Sydney’s median rent for units has decreased by 3.8%, the current price sitting at a median rent of $500. The median rent for houses has remained the same at $530.
Melbourne’s rental prices fell over the June quarter for both houses and units. The median unit rent price has dropped by 3.5%, sitting at a median rent of $415 and the median house rent price has dropped by 2.3%, sitting at a median rent of $430.
Brisbane’s house and unit rents also fell over the June quarter, as the median unit rent price dropped by 1.3%, sitting at $380, whilst the median house rent price decreased by 2.4% sitting at a median rent of $400.
Perth had only experienced a decrease in their median house rent price by 1.3%, with the median rent at $370. The median rent for units still is at $320.
Hobart experienced a large decline in rental prices for both units and houses. Its median unit rent prices declined by 8.4%, with the median rent sitting at $380. The median house rent prices declined by 4.3%, with the median rent sitting at $450.
Canberra suffered a slight decrease with its median rent prices, with unit prices dropping 2.1%, sitting at a median rent price of $470. The median rent for houses dropped minimally by 0.9%, with the median rent at $575.
Adelaide did not experience any decline to median rental prices, sitting at $320 for units and $395 for houses. Darwin also did not experience any decline. Here, the median rent for units is $380 and $480 for houses.
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Rental negotiations have been a safety net for some renters, while the government wage subsidies schemes are also helping to cushion the financial impacts of COVID-19. Some renters, however, are not eligible for the government schemes.
Landlords and tenants have been encouraged by the government to work together through the pandemic. While some landlords are able to help out the tenant, not every landlord is in the financial position to do so.
Property managers have had to adapt their roles in order to become mediators in tenant/landlord rental negotiations during COVID-19, particularly when both parties have suffered and are struggling financially.
Real Estate Institute of Victoria President, Leah Calnan, told to realestate.com.au, “You’re trying to find a happy medium. You’ve got owners who have lost their income, their job, you’ve got some tenants that are in the exact same situation, you have some landlords not being reasonable, some tenants not being reasonable, it’s a heavy weight for property managers.”
If an agreement between the two parties can’t be made, then the case has to be taken to a tribunal to try and find a temporary solution, which can take up to a couple of weeks to hear the outcome of it.
The compulsory code for commercial tenancies will be legislated under each state and territory jurisdiction and actioned through a binding mediation process.
The code will apply to tenancies where the tenant or landlord is eligible for the Jobkeeper program, and where there is an annual turnover of $50 million or less. The landlord and tenant will be required to work together to come to a solution – tenants will need to continue to honour their tenancy agreement and landlords will not be able to evict their tenant.
Landlords will be required to reduce a tenant’s rent through a combination of rent waivers and deferrals over the pandemic period, which must be proportionate to the trading reduction of the tenant’s business.
Words by Ece Demir
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- Monthly Housing & Economic Chart Pack, August 2020
- Moving back home proves perilous for virus-hit renters
- Unit Prices Fall Over June Quarter
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