The ‘boomerang’ effect that is forcing rents to nosedive
RENTERS can expect even bigger discounts in the months ahead as vacancies continue to climb.
Rents have already dropped about 7 per cent across Sydney as a whole compared to last year but housing experts said falls would continue because the pool of tenants was evaporating.
Landlords have been under pressure to cut their rents from multiple fronts, including rising unemployment leaving fewer tenants able to pay full rent.
Restrictions on global travel also meant homes that would have been occupied by international students became empty. This trend was especially pronounced in the Sydney CBD where nearly one in seven rental units were vacant at the start of May.
Recent travel restrictions had further implications for the holiday home market as properties once used as short-term accommodation for tourists became relisted as long-term rentals.
But another ongoing trend could make an even bigger dent in rental demand - unemployed twenty-somethings moving back in with their parents.
Research from Finder.com.au revealed close to 330,000 adult children moved back in with their parents due to the economic fallout from the coronavirus pandemic.
About in one in four Aussie households now had an adult kid living at home, the Finder survey estimated.
Finder personal finance expert Kate Browne said thousands of young adults didn't have enough money to pay the rent and bills due to sweeping job losses and reduced income. "From young professionals who have lost their jobs, to expatriates returning from overseas, COVID-19 has had a negative financial impact on many Aussies," Ms Browne said.
"Some have no choice but to move back in with mum and dad … Others may have also moved back home to help their older parents during the lockdown."
Rod and Meaghan Staples recently had to welcome son Adam back home after his university in Bathurst banned living on campus.
"He's been back home since mid-March, studying online," Mr Staples said.
The return home also cut short a work experience stint Adam was doing, while retail closures and restrictions on dining meant there was no part-time work available.
"It's been disappointing but I guess everyone has been affected by (COVID-19) in some way," the older Mr Staples said.
Demographer Mark McCrindle estimated there were close to three million Aussies who have changed their living arrangements since the pandemic hit.
He said it wasn't just young people returning home but couples cohabiting, singles sharing houses to save money and the elderly moving into the homes of their children.
Teenagers and twenty-somethings were the most vulnerable economically because about twice as many lost jobs compared to older workers.
A quarter of jobs in hospitality and tourism - a major employer of young Australians - have vanished since COVID-19 forced pubs, clubs and eateries to close two months ago.
ABS data revealed 15 per cent of under-20s lost work between 14 March and 2 May, compared to 7.3 per cent of workers of all ages.
Nearly 11 per cent of workers in their 20s lost work, compared to 6 per cent of those in their 30s and 4 per cent of 40-something workers.
Realestate.com.au chief economist Nerida Conisbee said landlords in Sydney's higher density areas were more exposed to the shrinking rental demand. Most of the tenants leaving the rental market would have normally occupied two-bedroom or one-bedroom apartments within inner suburbs or commuter hubs such as Parramatta, Ms Conisbee said.
Rents for "family-friendly" houses were more stable because the type of tenants occupying these properties were less affected by the outbreak, she added. "There was already a high supply of two-bedroom apartments in areas like Parramatta and Sydney Olympic Park before the outbreak, now there's even more choice … it makes it much easier for tenants to negotiate," Ms Conisbee said.
SQM Research figures revealed annual falls in unit rents were the largest in the CBD and lower north shore at about 14 per cent and 17 per cent respectively.
Originally published as 'Boomerang' effect dropping rents