How has Covid-19 impacted the residential rental market?

During March and April we were inundated with calls from worried and struggling tenants requesting that we speak to their landlord about their request for a rent reduction. A good agent knows that they must not just be a conduit to the landlord by presenting them with a problem, but rather work on a considered solution.  At this time, it was a challenge to determine what an appropriate response should be, as there is a risk it could be either too generous or not generous enough.

In the first instance our advice to stressed and anxious tenants and landlords was to remain calm and focus on the urgent things like their health, family and sorting out access to Government benefits and in the meantime pay as much rent as they were able to. We provided all those tenants impacted a simple but comprehensive submission form for them to complete and attach all the relevant documentation to.  This enabled us to properly consider and review their circumstances and make a recommendation to the owner for how to negotiate appropriate rent relief.

In May the government issued guidance around the level of the impact to household income that would warrant a tenant requesting rent relief, and urged landlords to negotiate with their tenants to provide rent relief while at the same time reiterating that the current leases still stand. Some landlords have waived a portion of rent for a limited time period, and others have deferred a portion of rent payment to a later date. How sustainable and appropriate each of these scenarios is depends on the circumstances of each case.

Sadly Landlords have been left wearing the brunt of the economic fallout of covid-19, with the vast majority not able to access the government support provided (land tax relief you can read about in this blog post).  As time goes on and the economy starts up again, many tenants are able to return to paying their regular rental amounts, however some tenants remain severely economically impacted.  As the market continues to adjust to the changing conditions, some tenants are finding that their budget will not extend to the market value of their current rental property and will seek to move to a property that is more aligned to their budget.

We are mindful that both under-renting a property and also facing into a vacancy factor (inevitable with a change in tenancy) will impact the return being generated for the landlord.  Your agent should be able to carefully consider the situation of both the tenants and landlord alongside the local market conditions for your property in order to provide you with the right advice.

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