For the first time in living history, it would be fair to say that the tables are turning in Sydney’s tenant – landlord relationship. For years, this relationship was heavily skewed towards the whims and financial gain of the asset rich, with tenants living in constant fear of rent rises, evictions and being bullied by barely literate property managers.
Ignoring the reality that market conditions are cyclical and there are always ups and downs in financial things, Sydneysiders were still being carried by the euphoria of the Sydney Olympics in 2000. It was all a big party of snorting lines and getting rich fast schemes, until a lethal virus coined Sars-Cov-2, also known as novel coronavirus, started spreading around the world in January. Australia has been very successful at stopping the disease, preventing thousands of death. However the economic fallout is yet to come, with Sydney expected to experience its worst downturn since 1930.
As the Sydney Morning Herald points out, "Sydneysiders went into the coronavirus downturn with an unprecedented level of household debt and that may weigh on spending unless there is a rapid recovery."
The same article finds that "the city's economic growth performance during the past decade has been closely linked to the dynamics of the property market and the behaviour of house prices is likely to be influential in the months ahead."
In other words, the COVID-19 recession goes straight to the fundamentals of the great Australian dream; that Australia is somehow different and house prices will keep rising forever.
Property party is over
People who lost their jobs are moving back in with their parents, asking for rent reductions, a glut of AirBnB rentals have been added to the long term rental market. Suddenly we live in a city of with an abundance of vacant properties and falling rents.
Already, the usual voices are out there lamenting how this is all really bad for mum & dad investors who depend on rental income to finance their property aspirations. Boohoo. The whole point about a property bubble is that the last buyers are the worst hit. It’s like a game of musical chairs where the losers end up with recurring cost, negative equity and high levels of debts.
I really feel sorry for these people, especially young people who were pushed by their baby boomer parents to overstretch themselves financially bought houses and off the plan apartments to 'get a foot on the ladder'. But property investment is an investment and carries inherent risk.
Rents should reflect falling market rates
Consider the plight of renters, who despite representing a third of the population, have not been considered important enough to make any serious policy or legislative changes in recent decades. Naturally, agents and owners are still fighting the motion that rent reductions will become the norm. For example, renters are being bullied to provide evidence of loss income to justify a reduction in rent. Instead, renters should use the argument that owners have pushed on us so many times – market rates.
If that doesn’t work, there is always the ‘voting with your feet’ option. As someone who has moved places in Sydney every 18 months in the last five years, I know how much of a hassle and cost is it to pack up and move house with the troops. But shopping around for a better deal is the only way to teach agents and owners with a lesson. Owners that refuse even the most basic repairs and maintenance and only see tenants as cash cows.
We're currently five months into our 6-months lease. Still waiting for keys to be handed over, smoke alarms were only installed after 10 emails telling the agent that this is a compliance issue. The place is cold and drafty in winter, piping hot in summer. Our electricity bill doubled.
Quite a few people I know are also considering their options. The common theme: Agents refusing to fix defects. Owners not willing to maintain and modernise properties and when they do, hike up the rent straight away to recover the cost.
Already, there are 70% more rentals on the market in suburbs like Bondi, and many properties now come with one week free rent or more. At the moment, the economy is still in JobKeeper induced coma, but wait till September.
Rather than people lining up at inspections, there will soon be competition for quality tenants to pay your ‘property management’ fees and investment mortgages.