Rent

EXPERT INSIGHT

The national residential vacancy rate fell from 2.1 per cent to 1.9 per cent in April.

But these figures mask some serious variances across the country.

CoreLogic has already reported rents turning vertical in some markets, and now SQM Research is seeing the same.

This will eventually feed into inflation figures (although the ABS uses a measure of all rents, not just newly let properties, which will dampen the inflation impact a little).&nbsp;

Sydney&#39;s vacancy rate fell to 3.1 per cent in April, now well down from 3.9 per cent a year earlier, and gradually tightening. And Melbourne saw its vacancy rate drop from 4.4 per cent to 4 per cent in April as confidence returns in the city economy.&nbsp;

[smartcode_project:default project_id=90550]

There are still relatively high vacancy rates in the CBD markets as offices remain only half full, while tenants have often eschewed density over the past year.

SQM believes that household sizes have declined, as people shun living together in groups through the pandemic, which intuitively makes sense.&nbsp;

Almost everywhere else rental markets have tightened dramatically.&nbsp;

Brisbane&#39;s vacancy rate fell to 1.4 per cent from 2.8 per cent a year earlier, and every other capital city is now very tight at under 1 per cent.&nbsp;

Some of regional markets have reached crisis point.

I&#39;ve seen it first hand in Noosa, while SQM noted that the Gold Coast and north coast of New South Wales have often seen rental price hikes of about 30 per cent for houses.

Some parts of Perth are seeing the same.&nbsp;

This again goes to demonstrate how &#39;macro&#39; figures are only so useful for property market participants.

Immigration is effectively &#39;switched off&#39; at the moment, yet many rental markets are now feeling the pain of the preceding credit squeeze on investors, with rental supply approaching crisis point.

ACT case study

There was a bit of a debate some years back, where I suggested to a few economists that Canberra&#39;s property taxes would lead to spiralling rents, making Canberra the most expensive place in the country to find a rental.

My contention was essentially thus:

<ol>
	<li>Economists say property taxes won&#39;t lead to rent increases</li>
	<li>Property taxes ratcheted up apace</li>
	<li>Rents spiral</li>
	<li>Economists say record high rents are actually because of something else</li>
</ol>

Or something like that anyway.&nbsp;

COVID-19 threw in a major interruption to normal service last year, but now the double digit increases for Canberra&#39;s asking rents are hoving back into view.&nbsp;

In September 2014 the median asking rent for a house in Canberra was $465/week, while today it has increased to $690/week and now looks set to spike much higher on SQM&#39;s data series.&nbsp;

As such Canberra will take out the title as most expensive capital city in which to rent this year, eclipsing Sydney and Melbourne, although the jury is still out on the role of property tax.&nbsp;

Asking rents for units increased more modestly from $370/week for $490/week over the same time period, although one suspects that data series has partly been skewed higher by the relatively high number of new units constructed in the nation&#39;s capital.&nbsp;

The national residential vacancy rate fell from 2.1 per cent to 1.9 per cent in April.

pwargent

Large rental price increases across property markets: Pete Wargent

<html><body>
Once again we need to ask the question: where in this nation of "chronic housing shortages" is the rental growth?
The latest Rental Report from Domain Group records virtually no rental growth in the capital cities in the September quarter. And, in annual terms, rental performance ranges from weak to nothing to negative.
The report covers the rental market for houses and for apartments in each of the eight capital cities. That's 16 rental markets in total, and in the past 12 months half of them have recorded falling rents or no growth.
The best performance in an Australian capital city is in Hobart, according to these figures, with a 4% rise in the median asking rent for units and a 3.3% rise for houses. That's a very anemic result, but it's the best in the nation apparently.
If you believe the constant rhetoric from the developer lobby, Sydney has the nation's most serious shortage of housing – yet in the September Quarter the median rent for houses did not change and the median rent for apartments fell 1%.
In annual terms, house rents in Sydney have grown a meagre 2% and apartments rents 3.1%.
The position in all the other capital cities is weaker than that.
Perth's rents have dropped around 6% in annual terms for both houses and apartments. In Canberra, the median rent for apartments is down 5% and for houses it's dropped 2.7%.
Darwin is down 2.9% (houses) and 1.8% (apartments).
Overall it's a very pallid performance and one that's inconsistent with claims of "a chronic housing shortage crisis", one that apparently demands urgent action from government.
The federal inquiry into the non-existent housing affordability problem, the one that is based on an Australian Bureau of Statistics miscount of first-home buyer numbers, is being fed a series of wish lists from groups representing builders and developers.
The common theme is that if you give developers everything they've ever wanted, they'll go away and build lots of dwellings and affordability will be miraculously transformed.
Economists, journalists and other commentators across Australia have bought the "chronic shortage" storyline and so it's accepted as fact by many people.
But there's a lack of evidence to support the idea and plenty of data that suggests the claim is nonsense – including rental performance.
The performance of rents has been so poor, yields have fallen in virtually every capital city market in the past 12 months. Only Hobart has managed to lift rental returns.
I continue to believe that the most pressing issue for markets around Australia is the opposite one, one of emerging over-supply in key locations.
Terry Ryder is the founder of hotspotting.com.au. You can email him or contact him on twitter.
 
</body></html>

terryryder-YECXbqmri2

If there's a housing shortage, where's the rental growth?

<html><body>
EXPERT OBSERVER
While media obsesses over price data as the only market measure worth talking about, the forgotten barometer is residential rentals.
Not only does mainstream media misunderstand and misinterpret median price data, but it largely overlooks the fundamental importance of what’s happening in the rental markets of our major cities. 
Vacancy rates and rental growth figures are important because they’re often a pointer to future rises in dwelling prices.
Before Sydney got on its growth path with price rises, it had a couple of years of strong growth in rents. Hobart, currently the price growth leader in capital city Australia, also had notable growth in rentals before prices started to rise. 
According to the latest SQM Research figures, Hobart still has the lowest vacancy rate among the cities and it’s still delivering significant rental growth alongside the price growth - still rising in double digits, according to some (but not all) research sources).
This is a pattern that, according to the research, is common - rents rise before prices do. This makes patterns with vacancies and rents worth noting.
So I’ve looked at the latest rental data from two key sources, Domain and SQM Research.
The market leader is a toss-up between Canberra and Hobart. This makes sense when you understand that these two cities have stood out for the past couple of years as the places with the tightest rental markets, both with vacancy rates well below 1 percent.
In the national capital, both Domain and SQM have house rents rising between 8 and 9 percent in annual terms, while apartments rents are up 7 percent (Domain) or 5 percent (SQM).
In Hobart, the two research sources agree that rents have risen markedly for both houses and apartments, but the numbers are quite different. Domain has rents up 11 percent for houses and 9 percent for apartments; SQM’s growth figures are 5 percent for houses and 14 percent for units.
So it’s pretty clear-cut. Canberra and Hobart have been the leading cities for low vacancies and strongly rising rentals.
But what is the third-ranked city in those terms? The answer is the city no one (other than me) ever talks about, Adelaide.
Adelaide’s vacancy rate has been hovering around 1 percent, according to recent SQM figures. Some sectors of the Adelaide market, such as the City of Marion, have vacancy rates closer to 0.5 percent.
And recently the SA capital has been producing solid rental growth figures. Domain records annual growth of 4.2 percent for houses and just under 2 percent for apartments, while SQM reports around 3 percent for houses and 3.4 percent for apartments.
Adelaide’s growth seems fairly moderate but, to put it in perspective, the two research sources have Sydney rents stagnating or falling. SQM, for example, has Sydney house rents down 3.6 percent and apartments falling 1.2 percent in annual terms.
In Brisbane, where vacancy rates have been high (although now trending downwards), rents have been fairly stagnant over the past year.
In Darwin, where vacancy rates have been elevated for several years, Domain has house rents down almost 4 percent and SQM records a reduction of close to 6 percent.
Domain records no change in Perth rents for both houses and apartments, although SQM suggests house rents are showing early signs of a return to growth - which would correlate to steadily improving figures on vacancy rates.
Melbourne’s rental data is moderate only, with both sources suggesting rises of 2-3 percent in the past 12 months.
So where do the vacancy/rental trends point us, in terms of predicting future growth in prices. I would suggest the best answers (particularly when considered alongside other evidence) are Adelaide, Canberra and Perth.
Canberra has very low vacancies and strongly rising rents. It also has a strong local economy and rising sales activity. Its price growth, currently solid but moderate, should improve. The top end of the market is already rising.
Adelaide has low vacancies and improving rental growth. It also has an improving local economy and a busy sales market. Price performance, already strong in the million-dollar suburbs, should escalate.
And Perth, where rents and prices have been falling in recent years, is poised to rise. Its vacancies are trending steadily downwards, there’s evidence of rising leasing activity and the first signs of a return to rental growth. As the state economy improves, sales activity is steadily rising - and price growth is already happening in the top end suburbs.
Terry Ryder is the founder of hotspotting.com.au
<a href="mailto:%20&lt;script%20type='text/javascript'&gt;%20%5Cn%20&lt;/script&gt;&lt;script%20type='text/javascript'&gt;%20%20&lt;/script&gt;This%20email%20address%20is%20being%20protected%20from%20spambots.%20You%20need%20JavaScript%20enabled%20to%20view%20it.%20&lt;script%20type='text/javascript'&gt;%20%20&lt;/script&gt;"></a><a href="https://mailto:ryder@hotspotting.com.au">ryder@hotspotting.com.au</a>
twitter.com/hotspotting
 
</body></html>

Top three Australian cities for rental growth and lowest vacancies: Hotspotting's Terry Ryder

<html><body>
Brought to you by
<img src="/images/marketing/frasersProp_black_rgb.jpg" height="50px">
Planning how to rent out an off the plan apartment is similar, if not the same, to other forms of property investment strategy, however some developers may offer a rental guarantee on the new purchase.
Developers generally offer a rental guarantee for the first year or two, however many property professionals warn against buying into a development that offers a rental guarantee.
iProperty Plan director Mark Armstrong says by accepting a guaranteed rent level, investors are insulated from market forces.
“As newer properties come on to the market and tenants have a wider choice of places to live, the market rent for a property could fall,” says Armstrong.
Market analyst <a href="https://www.urban.com.au/guides">Catherine Cashmore</a> says the rental guarantee is always factored into the sale price of the apartment.
Cashmore says rental guarantees can be between 5% to 7%. If an investment has a gross return of 6% and the developer guarantees $300 a week rent, the purchase price would be $260,000.
But if the market rent is in fact $250 a week, the property is really worth $218,000, resulting in investors paying 19.2% over the market value.
“Once the guarantee expires, the unit’s yield will revert back to market forces,” says Cashmore.
Armstrong says once the guarantee expires, investors will need to have sufficient cashflow to hold the property during periods when the property is not tenanted.
Property 1 real estate agent Garth Rothwell says rental guarantees are good for overcoming fear of loss due to a vacancy period but in reality, all rents are guaranteed.
“I guarantee there will be people willing to rent a unit, it just comes down to how much rent they are willing to pay.
“Guarantees that are offered by the developer and are above market value are bound to fail, as proven in the past, as they are unsustainable over the medium to long term.
“Rent guarantees based on market value for a period of one to three years can be beneficial for investors to overcome the fear factor and help the investor with cash flow in the initial years of the purchase,” says Rothwell.
“Ultimately it comes down to how the rent guarantee is funded.”
Off the plan apartments can be advertised for rent prior to settlement but Rothwell says the investor will require the developer’s permission to advertise early, as the developer will have to authorise access to conduct inspections.
“If the unit is leased prior to settlement, the developer is entitled to the rent collected prior to the settlement date.
“If a guarantee is in place, the developer will already have this process in place,” says Rothwell.
For investors wanting to rent out their new apartment, Rothwell advises to price the unit at market value, not emotional value.
“Investors should be prepared to trade off $10 to $15 per week in rent to get a better tenant sooner, or alternatively a tenant with a small pet may pay more.
“The investor needs to identify the type of tenant they wish to attract, familiarise themselves with relevant facts regarding pets, body corporate rules and on site management,” says Rothwell.
Rothwell advises that a pre-purchase/settlement inspection is organised from a licensed building inspector and that a detailed initial inspection report is completed.
“Complete all guarantees for stoves, ovens, dishwashers and air conditioners and ensure a landlord’s insurance policy is in place to cover loss of rent due to malicious damage and a basic contents policy to cover any dispute about building or contents,” says Rothwell.
As with any property investment, research is the key to ensure the numbers add up and that all the correct measures are taken to safeguard investors and their property.
{rsform 49}
</body></html>

ntrotman-Et3xWpamVh

How to: Rent out an off the plan apartment

<html><body>
EXPERT OBSERVER
High-intent renters are still very active on realestate.com.au, despite a softening market and relatively high supply.
The REA Insights Weekly Demand Index is a weekly metric that looks at the volume of high-intent renter activity on the realestate.com.au website and app and tracks that activity over time.
Specifically, it looks at how users are behaving when they interact with live rental listings.
The characteristics of serious renter activity includes but is not limited to; the number of visits to a listing, looking at the photos for a listing multiple times, saving the property, sharing the property and/or making an enquiry with the agent.
Who is it useful for?
For renters looking for new rental accommodation the index gives a good indication of the level of competition they can expect when they look at and apply for properties. Higher renter activity on a listing would suggest greater competition for that property or property type. In this index we’ve aggregated the high-intent rental activity and analysed it by state.
For owners of rental properties the index indicates the likelihood that they will be able to rent out their property.
Why REA Group is well placed to tell this story
Realestate.com.au is Australia’s number one property portal. In April 11.9 million Australians visited the platform* creating an unparalleled view of consumer demand for Australian property. This vast onsite activity sends millions of signals of intent that allow the experts at REA Insights to model behavioural demand.
What is the latest data actually showing?
The latest data shows that the number of highly-engaged rental listing interactions on realestate.com.au increased by 2.7 per cent last week. That means that serious renter activity has now increased for 10 of the past 11 weeks (falling the previous week) and is up 102.9 per cent from its low in March. The 2.7 per cent weekly increase did not completely offset the -4.3 per cent fall the previous week.
One of the likely drivers of such high volumes of serious renter activity is the fact that the number of new rental properties becoming available is shrinking. With less stock, those serious about renting are required to narrow their focus and are more likely to be highly-engaged with what’s available online.
The data indicates that it isn’t just search volumes that are climbing, we are also seeing a significant increase in the volume of people searching that are in the late stage of their rental decision.
All states recorded an increase in the volume of high-intent rental activity last week except for Western Australia and Tasmania, which fell slightly.
Since the recent low related to COVID-19 serious renter activity has more than doubled in New South Wales (110.2%), Victoria (133.8%) and Australian Capital Territory (140.1%). The smallest gains have occurred in Tasmania (45.2%) and Northern Territory (48.5%).
What about compared to last year?
Nationally, serious renter activity is up 70.5 per cent higher on last year.
The heightened rental activity is being felt in all states and territories with the largest annual increases in Australian Capital Territory (102.0%) and New South Wales (84.3%), while South Australia (20.8%) and Western Australia (41.5%) recorded the smallest increases.
While a lot of people are showing high-intent in their rental searches it remains to be seen whether they will actually move, especially considering there is a rental moratorium in place.
The rental market remains challenged with international borders closed, first-home buyer demand being pulled forward the government’s HomeBuyer initiative and people under the age of 30 being much more likely to have lost their jobs through COVID-19.
While a lot of people are actively looking at rental accommodation it may not be until later in the year when we actually see them moving into new rental accommodation.
CAMERON KUSHER is the Director of Economic Research for the REA Group
</body></html>

j.ballantyne1990-6AQqhLzZaK

High-intent renters are still very active on realestate.com.au: Cameron Kusher

<html><body>
The Real Estate Market Facts quarterly report has shown an impact on prices from the COVID-19 pandemic, but it has not been as dramatic as some have predicted.
“In the March edition I flagged that June quarter 2020 will reflect the impacts of the start of the COVID-19 pandemic on both the sales and rental markets,” said REIA president Adrian Kelly.
“Whilst there has been an impact on prices it is relatively modest and has certainly not been the doomsday prophesies some commentators expected.
“Nor has the impact been uniform across Australia with local market conditions varying, resulting in a range of outcomes.”
This REMF edition shows in the June quarter 2020 the weighted average median price for houses for the eight capital cities decreased by 2.2% to $770,359, with only Darwin having an increase and Adelaide remaining stable.
This is the first quarterly decrease since March 2019. For the year the weighted average median price for houses for the eight capital cities increased by 5.9%.
The weighted average median price for other dwellings also decreased by 1.9% to $592,415 over the quarter, with only Adelaide and Hobart recording increases.
For the year the weighted average median price for houses for the eight capital cities increased by 4.8%.
Over the quarter, the median rent for three-bedroom houses decreased in all capital cities except for Canberra, where there was a marginal increase, and Sydney where the rent remained stable.
The decrease in median rents for 3 bedroom houses, over the quarter, was 1.6%. There is a consistent pattern for June quarter median rents to decline and the 2020 decline cannot be attributed entirely to the impact of COVID-19. Indeed the quarterly decline is below the June 2018 decline of 2.5%.
The median rent for two-bedroom other dwellings decreased in all capital cities except Darwin, which had a 1.7% increase. The largest decline was in Melbourne, and at 8.7% it's the largest decline in the past 10 years.
The weighted average vacancy rate for the eight capital cities decreased to 3.0% during the June quarter, which shows a loosening in the market compared to last quarter.
“A factor contributing to the market stability is the decline in the number of listings for sale,” said Mr Kelly.
“In all capital cities except Perth the number of houses and other dwellings for sale declined compared to the June quarter 2019.
“The biggest declines were in Hobart where the number of houses for sale declined by 33% and the number of other dwellings by 26%.
“The market is holding up better than many expected with the Government’s initiatives of JobKeeper and JobSeeker as well as the banks loan deferrals playing their part in stabilising the situation.
“With extensions to these having been announced we expect continued stability in the market,” concluded Mr Kelly.
</body></html>

Rents across most categories have seen drops across Australia with few exceptions: REIA

<html><body>
GUEST OBSERVATION
A department store employee wheels clothes across Melbourne’s Bourke Street Mall on August 5 2020, as retailers prepared to close their doors to customers.
“This is not a bluff,” <a href="https://www.theaustralian.com.au/business/companies/mosaic-could-shut-between-300-500-stores-amid-rent-disputes-online-switch/news-story/8868980e1be2de4048b93b17b9da3880">Scott Evans</a>, the chief executive of Mosaic Brands, has said of his threat to permanently close 300 to 500 stores in Australia unless landlords reduce rents.
Mosiac’s network of about 1,300 apparel stores includes Katies, Noni B, Rivers, Rockmans, Millers and Crossroads. With stores shuttered temporarily due to COVID-19 restrictions, it posted a <a href="https://www.afr.com/companies/retail/mosaic-brands-to-close-stores-after-170m-loss-20200824-p55ovi">A$170.5 million loss</a> in the year to June.
It and other retailers such as <a href="https://www.premierinvestments.com.au/our-brands/">Premier Investments</a> (owner of Just Jeans, Portmans and Jacqui E brands) <a href="https://www.smh.com.au/business/companies/westfield-locks-retailers-out-of-stores-as-rent-battle-escalates-20200820-p55ns2">have reportedly</a> been paying lower or no rent to landlords, on the basis their rents should reflect revenue and landlords should share the pain.
Last week Mosiac’s stalled rent negotiations with Australia’s biggest shopping centre landlord, Scentre Group, led to a <a href="https://www.afr.com/companies/retail/retailers-landlords-in-open-warfare-over-rents-20200825-p55p5f">lockout of 129 Mosaic stores</a>. Scentre also locked the doors to 38 stores owned by luggage retailer Strandbags.
According to <a href="https://www.theaustralian.com.au/business/companies/mosaic-could-shut-between-300-500-stores-amid-rent-disputes-online-switch/news-story/8868980e1be2de4048b93b17b9da3880">Evans</a>:
The retail rental market in Australia is not paused because of the pandemic. It is fundamentally changed for the future.
A history of growth, conflict and negotiation
Though the coronavirus crisis has brought things to a boil, tensions between shopping centre tenants and landlords have simmered for more than 40 years.
Behind Mosaic’s standoff with Scentre are the underlying power dynamics between tenants and landlords. Mutually dependent on one another, they have always fought over the spoils of shopping centre profits. With the COVID-19 crisis, strained relationships are starting to break down.
Australia’s first American-style <a href="https://australianfoodtimeline.com.au/first-australian-shopping-mall/">shopping centre opened in 1957</a>, in the Brisbane suburb of Chermside. It had space for one department store, one supermarket, 24 specialty stores and parking for 650 cars.
As the rise of the private motor car reshaped cities and suburbs, <a href="https://www.propertyobserver.com.au/https://www.routledge.com/Managing-the-Marketplace-Reinventing-Shopping-Centres-in-Post-War-Australia/Bailey/p/book/9781138323025">shoppers embraced</a> the convenience and comforts and comforts of the mall.
By the late 1970s they were the dominant shopping experience, outstripping many established “high streets”. They became <a href="https://www.propertyobserver.com.au/https://epress.lib.uts.edu.au/index.php/sydney_journal/article/view/2817">social as well as commercial hubs</a>.
They were also protected by planning legislation intended to constrain sprawling development, but which also created geographic monopolies by blocking competition nearby.
This all produced highly sought after and valuable retail space.
Naturally owners were keen to increase their profits by <a href="https://www.google.com.au/books/edition/Managing_the_Marketplace/ZbXjDwAAQBAJ?hl=en&amp;gbpv=0">expanding these spaces</a> to attract even more shoppers.
Calls for government intervention
But as centres got bigger and more and more specialty retailers signed leases, complaints began to emerge about exploitation and steep rent hikes. By the early 1980s tenants’ complaints had become an issue for both sides of politics.
Intense lobbying led to government inquiries around the country, which found sufficient evidence to recommend industry self-regulation and then <a href="https://www.propertyobserver.com.au/https://www.legislation.nsw.gov.au/#/view/act/1994/46">retail tenancy legislation</a>.
But the fundamental power dynamics remain. Landlords still have the most convenient and attractive locations for stores. They have control over entire retail environments, and even collect the sales data of their tenants. Their bargaining position in leasing negotiations is invariably very strong.
Sharing profits and costs
In 2008 a <a href="https://www.pc.gov.au/inquiries/completed/retail-tenancies/report/retail-tenancy-market.pdf">Productivity Commission inquiry</a> noted:
Well-managed shopping centres can unify a large and divergent group of tenants and help centre trade. In return, tenants in centres generally pay higher rents and outgoing expenses than similar tenants in a shopping strip and forego some independence in operating their business.
It has often been a mutually advantageous relationship, but there has always been a contest between tenants and landlords over how they share both benefits and costs.
The retailers’ argument is rent should be based on the value of the customer traffic the shopping centre delivers to their stores, and those customers have evaporated with COVID-19. As analyst <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2020-05-21/shopping-centre-landlords-among-biggest-coronavirus-losers/12271266">Bill Mooney put it</a>:
With a lease agreement there’s an expectation of a certain amount of customers coming through into the shopping mall and if that nexus is broken, then yes, the landlord can insist on his rights, but which retailer is going to continue to pay rent and go broke?
Mosaic’s projection of store closures emphasises this point.
No one will come out of this a winner. The fight to minimise losses will be bitter. The first casualties will be the most vulnerable: the smallest tenants, with the least bargaining power, in the most precarious financial situations. This echoes the broader pattern of the pandemic’s impact.
For landlords there are longer-term questions. Will the current standoff push retailers towards a permanently smaller physical footprint and greater investment in online shopfronts? Has it created even more uncertainty about retail’s future? How deeply has trust been eroded?
Whatever happens, when there is any sort of return to normal, both sides will enter fresh leasing negotiations with an acrid taste from what is rapidly becoming their most vitriolic fight to date.
<hr>
This article has been co-published with <a href="https://lighthouse.mq.edu.au/">The Lighthouse</a>, Macquarie University’s multimedia news platform.<img src="https://counter.theconversation.com/content/145094/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/matthew-bailey-414427">Matthew Bailey</a>, Lecturer, Retail History, <a href="https://theconversation.com/institutions/macquarie-university-1174">Macquarie University</a>
This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/trouble-at-the-mall-as-landlords-and-tenants-ponder-mutually-assured-destruction-145094">original article</a>.
</body></html>

Trouble at the mall as landlords and tenants ponder mutually assured destruction

<html><body>
EXPERT OBSERVER
COVID-19 continues to show an acute impact on inner city rental markets, the latest CoreLogic data on rental listings has revealed.
In the 28 days to August 9, total rent listings on market across Australia had eased on the previous month, falling 10.9% nationally.
While most regions are now seeing rental markets gradually tightening, there is still a significant uplift in rental stock around innercity areas, placing downwards pressure on rents and upwards pressure on vacancy rates.
A summary of the increases in rental stock by SA4 region is presented below. SA4 regions are defined by the ABS as broad regions of 100-300,000 people, and are a useful area of measurement because of alignment with labour force data.
The increase in rental listings represents the change in the level of total rental stock counted in the 28 days leading up to the 15th of March, the week in which Australia recorded its 100th case of COVID-19, compared with that counted in the 28 days to August 9th.
Of the 88 SA4 regions measured across the country, 78 regions saw a decline in the volume of rental listings between these dates.
Focusing on the 10 regions that have seen an uplift in total rental stock, 8 were regions across Sydney and Melbourne, while inner-city Brisbane and the Adelaide Central and Hills have also seen an increase in rental stock.
The dominance of Sydney and Melbourne with regards to heightened rental supply highlights the much localised nature of the shock to rental demand that has been seen since the onset of the pandemic.
<a href="https://www.propertyobserver.com.au/images/2020/8/13/SA4%20CoreLogic%201.JPG" target="_blank">Click here to enlarge</a>:
<img src="https://www.urban.com.au/images/2020/8/13/SA4%20CoreLogic%201.JPG" alt="">
It is expected seasonally that most areas would see a decline in rental listings, as rental stock on market is usually highest at the beginning and end of each year. For the four years prior to 2020, rental stock on market at mid-August has on average, been -3.2% lower than what is seen over mid-March.
However, the 10 regions that did see an uplift in rent listings are large rental markets. Together, CoreLogic data suggests these regions account for about 27.6% of Australia’s total rent market.
More geographically granular data shows some of the highest uplift in rental stock is across Inner Melbourne and Sydney City and Inner South. SA2 regions with the largest uplift in advertised rental stock are shown below
<a href="https://www.propertyobserver.com.au/images/2020/8/13/SA2%20CoreLogic%202.JPG" target="_blank">Click here to enlarge</a>:
<img src="https://www.urban.com.au/images/2020/8/13/SA2%20CoreLogic%202.JPG" alt="">
Across Southbank, rental stock has erupted from 568 rental listings in the 28 days to March 15, to over 1,200 by August 9th. In the year prior to the pandemic, total rent listings across Southbank averaged 450 listings per month. Interestingly, as Melbourne moves through its stage 4 restrictions, total rental listings have started to fall across most Melbourne regions.
Inner Melbourne, which has seen the highest surplus of rental stock since the onset of the pandemic, saw total rent listings fall -8.1% over the 28 days to August 9.
A significant portion of this decline was a reduction of 450 new listings counted in the lead up to the 9th of August, suggesting new listings have fallen off the back of physical restrictions around letting property.
The regions with large accumulations in rental stock reflect many of the pain points that have come with the COVID-19 downturn, particularly more recent commentary which has highlighted the gaping hole in housing demand because of international border closures. This is because the majority of new migrants to Australia are renters, at least initially.
The 10 SA4 regions which have seen an uplift in rental listings between March and August, together accounted for 29.1% of the net overseas migration to Australia over the year to June 2019. Other factors contributing to the heighted level of rent listings include a recent history of significant supply additions via a surge in high-rise construction activity, while the demand side has been additionally impacted by the weakness in labour markets typically associated with renters, including food and accommodation as well as the arts and recreation sector.
These trends highlight some of the acutely impacted markets. Due to the relatively high level of investor concentration, particularly in inner-city apartment markets, the patterns in rental supply and demand point to added downside risk for values in these precincts until international borders re-open and labour market conditions tighten.
ELIZA OWEN is the Head of Research Australia at CoreLogic
</body></html>

pchatterjee-seVgoiQgz5

Rental listings fell 10% across Australia in August: CoreLogic's Eliza Owen

<html><body>
During the quarter, DomaCom continued with remote working arrangements due to COVID-19 and progressed the development of key products which are expected to drive future revenue growth.
The Company also saw a strong growth in Funds Under Management, which rose 11.2 per cent in Q4 FY20 to A$71.4 million. 
Product development ramps up
During the quarter, the Company made progress across four products currently in development: Rent to Own, Essential Worker, Equity Mortgage, and Senior Equity Release. 
Rent to Own: The Rent to Own product documentation was completed in the June quarter along with the acquisition of the first RTO property. The Company is now looking for its second property to be acquired in Sydney. This product uses the develop distribution margin to provide a discount to investors whilst gifting equity to tenants each year. 
Essential Worker: DomaCom is progressing its Essential Worker affordable housing product with one of Australia's leading Community Housing Providers. This product aims to leverage the Government's affordable housing lending facility to deliver an RTO product for essential workers with a 25 per cent discounted rent. This product is expected to be attractive due to low vacancy risk stemming from the security of the tenants' employment (nurses, firefighters, teachers, police) in addition to the emotional impact of supporting essential workers at this time. The targeted launch period for this product is Q3 CY20. 
Equity Mortgage: Work is ongoing to deliver a Shariah-compliant mortgage product that is targeting Australian Islamic communities who, in accordance with their religion, are prohibited from borrowing money. This product is believed to be less exposed to the current negative property environment as it is aiming to provide a method of obtaining leverage for those who wish to purchase a home but cannot borrow. 
<div class="page" title="Page 2">
<div class="section">
<div class="layoutArea">
<div class="column">
Discussions are ongoing with a key B2C partner whilst the Company seeks regulatory approval for changes this product requires. The targeted launch period for this product is between late 2020 and early 2021.
<div class="page" title="Page 2">
<div class="section">
<div class="layoutArea">
<div class="column">
Senior Equity Release: Adviser accreditation for the Company’s Senior Equity Release (SER) product has progressed with a dozen advisers having completed accreditation. DomaCom has commenced a direct marketing campaign aimed at the retirees to help identify those needing equity from their homes. Covid-19s recent impact on self-funded retirees’ income has increased the market for this product and the Company is now seeking to obtain regulatory clarity on how the SER product works with the Government’s Downsizer legislation.
<div class="page" title="Page 2">
<div class="section">
<div class="layoutArea">
<div class="column">
Corporate
FUM increased from A$64.2 to A$71.4m in the quarter ended June, 30 2020.
Payment of remuneration to executive and non-executive directors and their related parties amounted to $184,000 during the quarter ended June 30, 2020.
As part of facilitating the completion of the Avery’s Green property development being carried out for a sub- Fund within the DomaCom Fund, DomaCom Australia paid a limited number of supplier invoices on behalf of the sub-Fund during the year ended June 30, 2020. In the 30 June quarter, these amounts were repaid by the DomaCom Fund resulting in a net inflow of $802,000 in the current quarter. DomaCom Australia, a subsidiary of DomaCom Limited, operates the DomaCom Fund. The DomaCom Fund is a separate legal entity with separate investors. It is designated a related party as DomaCom Australia is the Investment Manager.
DomaCom continued to carefully control costs during the quarter. Staff and administrative costs fell to $709,000 compared to $716,000 in the previous quarter. Advertising and marketing costs increased to $143,000 in the current quarter compared to $90,000 in the previous quarter as the Company introduced the market to new product offerings.
DomaCom’s cash position at the end of the June quarter was A$1.45m. The Company has refreshed its placement capacity via the EGM that was conducted 22 July 2020 and discussions are now progressing with an institution regarding a placement to top up the cash position.
DomaCom CEO Arthur Naoumidis said: “While the current environment is a challenging one, we are pleased that several of our key products are starting to gain traction in this environment. In particular, the ability to complete our first RTO syndication in the middle of the pandemic is a promising result. Encouragingly, we have seen significant investor interest in further RTO syndications and we are currently assessing potential acquisitions in Sydney."
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</body></html>

DomaCom completes first rent-to-own transaction

<html><body>
Prices fell sharply on CPI data in the June quarter for a number of reasons including rents, which were down 1.3%.
That fall is the first and greatest quarterly quarterly fall in rents on record.
Rental yields have also slipped to record lows, <a href="https://www.urban.com.au/expert-insights/buying/115880-rents-recorded-first-quarterly-fall-on-cpi-since-1972-commsec-s-craig-james">CommSec's Craig James took a look at the overall state of the latest CPI data</a>.
The ABS said, “Rents recorded the first quarterly fall since the series commenced in 1972."
"Weak rental market conditions as a result of COVID-19 lockdown restrictions and rising vacancy rates saw rents fall in most capital cities in the June quarter.”
However rental searches on realestate.com.au are up 39 per cent over the June quarter. Data from those searches reveals that tenants and prospective tenants are looking more often and looking for longer.
The volume of ‘high-intent’ search activity on the site is up an incredible 75 per cent over the same period.
“The results are a clear indicator of how COVID-19 has changed the property market dynamic,” REA Group Director of Economic Research, Cameron Kusher said.
“Rental rates are coming under pressure from multiple sources. We have virtually no migration, there is new stimulus encouraging purchasing from first home buyers who otherwise may have been renters, and then there’s the fact that unemployment is rising, and younger people are most affected."
“With a moratorium on rental evictions in place until September, the next quarter is unlikely to see rental CPI fall as severely. Thereafter it is likely rental rates will fall further and will take quite some time to recover to previous highs.
“The high demand on realestate.com.au is likely due to the possibility of finding cheaper and or better rentals, as evidenced by the CPI data,” he concluded.
</body></html>

Rent

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Rent

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News