This just in from the “Understatements of All Time” vault – 2020 has proven to be a year like no other. Inarguably, the Australian economy has literally been decimated. Through a combination of lockdowns, closures and a variety of other debilitating economic and social restrictions, Victorian investments – in particular - that at one time in the recent past were regarded and appreciated as solid and stable, are no longer so. These divested investments, of course, include rental property ownership. How exactly did this come to be? How is it that a sector historically heralded as steadily and healthily expanding now retracting? Why has Melbourne seen the greatest rent decline of all the major Australian capital cities? A brief exploration of the specific factors responsible for this mitigation is worth a look and very much worth understanding.

What, then, exactly is the state of affairs in Melbourne at the moment? Well, first and foremost, the international border closure has hit Melbourne particularly harshly. The overwhelming majority of overseas arrivals are renters. Think international students, for one. Secondly, the local labour market consists of high numbers of employees working in the arts, tourism and hospitality sectors – sectors that were all swiftly susceptible to job losses as a result of business closures and shut-downs. Unfortunately, many of these businesses will not survive, full stop. Specifically, these particular job sectors contain workers who are more likely to rent as compared to other industries. Finally, the second wave of restrictions that Melbourne endured throughout the June fiscal quarter resulted in an unprecedented and extraordinarily high loss of residents to other parts of Australia. This is hardly surprising, nor is the fact that the rental property market has suffered accordingly. General predictions include an easing of the rate of decline in unit rents as the “renter sector” employment conditions become healthier. As well, once international travel resumes, rental demand will naturally increase. When this happens, however, is anybody’s guess. Despite the whirlwind of uncertainties surrounding the lifting of the remaining restrictions, from August to November, the unit rent decrease has softened.

So, what precisely does the post-COVID local rental landscape look like for landlords? It suffices to say that landlords will be required to make an unprecedented effort to dot all of their I’s and cross all of their T’s. Here are a handful of pertinent points to consider.

  • Vacant properties need to be competitive in the marketplace, either by price or appeal, but preferably both.
  • Placing tenants in the current climate requires a strategy.
  • If a landlord has a tenant who has been COVID affected, realise that these effects may linger for awhile yet. If not the recipient of rent relief, a tenant may have accrued debts and may resultingly struggle to recover while catching up with their arrears. Government rent relief is still available for impacted tenants, so guiding them towards available relief has become another routine that Property Managers have learnt to adopt.
  • It is of monumental importance that an appropriate and specifically tailored landlord insurance policy is in place. As policies inclusions have been reviewed in the wake of COVID-19, it is more important than ever to do the research and read ALL of the fine print.
  • If you are fortunate enough to have relatively unaffected, stable tenants, ensure you look after these tenants, thereby avoiding vacancy, reletting costs and maximising annual returns. Many landlords have offered rental discounts during 2020. Needless to say, this decision is a constructive one. It will serve to build a positive rapport with tenants as the recovery process moves forward.
  • If you have a rental property with a pending vacancy, don’t hesitate to capitalise on current activity levels, but be prepared to negotiate in order to secure a tenant.
  • Remember, as well, that expats are slowly but surely returning home. This means the higher end of the rental market has the potential to become even more robust.

All in all, there is a lot of movement in the rental property market at the moment which makes it very workable but be patient and flexible and be prepared to review your strategy to achieve the best possible outcome.

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