Lockdown market requires ‘realistic’ investors

With these factors impacting both supply and demand, The Agency’s national head of property management Maria Carlino has pointed to two apparent outcomes:

• Regions have been outperforming inner-city areas
• Demand for houses has been exceeding demand for apartments.

This will continue to have an effect moving forward, and with major capital cities now being hit by snap lockdowns, what will the second half of the year look like for investors?

Capital cities

Sydney and Melbourne have both been dealing with a new wave of localised lockdowns due to COVID-19’s Delta variant outbreak, but the two capital cities aren’t telling the same stories in the rental market, Ms Carlino pointed out.

For one, Melbourne’s rental market has been deemed the “nation’s poorest performer” in the first half of the year, with rents returning to 2010 levels, which is partly a result of the prolonged lockdown in 2020,

Central Melbourne, in particular, saw vacancy rates hike up to 8.6 per cent amid the absence of overseas students, while other inner-city areas such as Stonnington, Toorak, Kew and Hawthorn saw vacancies rise to 3 to 8 per cent.

Moving on to the second half of 2021, Melbourne’s rental market may gain momentum on the back of an increasing number of enquiries for large family homes, Ms Carlino said.

In contrast, Greater Sydney’s vacancy rates have declined 1 per cent between April and May 2021, while regional areas like Illawarra and Central Coast showed even further tightening with fewer rental vacancies than its city counterparts.

Renovated houses and quality terraces within a 15km radius of the city also saw strong demand, which helped cushion rents further for the first half of the year, according to Ms Carlino.

Ultimately, despite the current lockdown, Sydney is expected to continue showing resilience in the second half of the year as demand improves on the back of high sales price and a strong economy.

“With positive economic data and more job security, there is more confidence in the market, with tenants looking to the future and able to plan… This should eventually lead to shrinking vacancies and, in many cases, growing rents.

“Although we’re in the midst of a lockdown in Sydney, we are better prepared than we were in early 2020, and we have also learned a lot from Victoria’s experiences,” Ms Carlino said.

Standing out in a ‘quiet’ market

But despite some positive predictions, Ms Carlino warned investors that the lockdowns will still have unavoidable short-term impacts to the rental market, particularly in terms of an imbalance in supply and demand.

As such, she is advising property investors to be realistic about the current market conditions and maximise current opportunities by making their properties stand out amid a sea of rental stock.

In a “quieter” winter rental market where tenants have more options, Ms Carlino advised landlords to focus on the “three Ps”: positioning, presentation and price.

They should also be prepared for the reality that prospective renters are likely to make an offer rather than sign a contract at the advertised price, she added.

“Landlords whose property is currently rented should be circumspect when it comes to increasing the rent.”

At the end of the day, in a property market marked by uncertainty, Ms Carlino said it’s best to engage with property managers to be able to make decisions based on current rental market feedback “rather than risk losing a tenant”.