Updated: Jun 29, 2020
Have you noticed that the real estate lobby has been out in force in recent days, sending calming messages to investors and home owners. “Prices have only gone down all so slightly, the recovery will be quick, the fundamentals remain intact”, haven’t we heard it all before. Mum and dad investors are still in denial of the changing distribution of power that high vacancy rates and falling rents brought on to Sydney’s rental market. And the property industry intends to leave it that way.
Traditionally the old saying ‘beggars can’t be choosers” squarely applied to anyone trying to rent a place in Sydney’s overpriced private market. You’ve got 10 minutes to inspect a property, then no further access to the place. The application process reveals more information about you than an MRI plus urine sample, and you will be arguing with your landlords and real estate agent ever since over urgent repairs and maintenance work.
Financial stress increasing for small scale investors
Now, news is making the headlines that investors are planning to offload properties in record numbers in the weakened rental market. The number of new apartment stock in Sydney has jumped 39% in the past four weeks alone. These apartments are often recently vacated. By the way, these reports were not published by a leftist student rag from Newtown, no, hold the horses, in the Property Observer quoting the Australian Financial Review.
The article states that “Competition for tenants has further intensified as short-stay landlords switched properties into the long-term rental market, leading to the owners of 820,000 rental properties being stressed. […] Another 120,000 plus are under severe stress.”
It's becoming clear that the COVID-19 pandemic has set in motion a downward spiral for many small scale investors. Yet, media coverage typically reinforces the typical stereotypes of wealthy landlord and struggling working class or migrant tenant.
As we previously explained, Australia’s private property investors are not really wealthy. They are ordinary people lured into the game by tax incentives, rapid capital gains and the desire to dominate others. If they don’t earn rental income and / or lose their job, they will have no choice but to sell their investment property. Especially once JobKeeper subsidies and mortgage freezes end in September.
Quality tenants are happy to shop around
Property investors will also have to compete for quality tenants. That’s right, compete.
That means more than just offering a week or two in free rent as it’s already happening today. More choice means tenants will go for properties that are better priced, newer or recently renovated, in a premium location, and the landlords are willing to make reasonable concessions such as allowing pets or agreeing to long term leases.
As outlined in my Manifesto of the Sydney renter, tenants are actually customers paying for a service. This sounds logical but I can see many investors struggling with the concept of renters having rights and being treated with respect. If you're thinking one week free rent is enough to sell your rundown property to quality tenants, think again.
The reality is, Sydney renters are already voting with their feet. Most tenants I know have recently moved places or planning to look for a better place before the end of the year.
The most commonly cited reason: Landlords refusing to maintain their property – from broken locks and window frames to moldy ceilings and walls. It’d be probably illegal to keep chickens under these conditions. What was once deemed suitable for tenants is really a disgrace. Now is the time to comply with requests and spend the extra dollars to keep a quality tenant.
And real estate agents, have you recently checked in with your tenants to see if they are happy? Or have you ignored a long list of repairs with the place falling apart?