Overcoming the ramifications of COVID-19 on the Australian rental housing market
The COVID-19 pandemic has dealt a devastating blow to the Australian rental housing market.
With massively reduced numbers of international students coming into Sydney and Melbourne, workers, predominantly in the hospitality, retail and arts industry, experiencing extreme losses to their income streams and short-term rentals sitting empty due to border closures and lockdowns, recent times have been tough for investment property owners.
Vacancy rates are soaring, returns are dropping and the abundance of new-build inner-city apartments, that were started prior to the pandemic, are close to hitting the market - creating even more inventory in an already flooded market.
Last year, the Reserve Bank of Australia reported the first quarterly decrease in rents for the investment property market in the 48-year history of the Consumer Price Index (CPI), and predicts the impacts of the pandemic will be felt for the next few years. Owners will be forced to deal with unoccupied rentals, rent reductions, tenants breaking leases due to loss of income and a portion of suitable candidates moving away from cities due to the explosion of working from home and the ongoing threat of snap lockdowns, making a tree or sea change more feasible for urbanites.
For many landlords, such turbulent times means what was once a solid investment with healthy returns two years ago has suddenly become an expensive headache.
While the banks offered a moratorium on loan repayments for vacancy periods, owners know those payments need to be made eventually; it’s placing a huge amount of pressure on already stretched budgets that may have been kept afloat by Government schemes like JobKeeper.
We are meeting with a lot of property owners who are really feeling the pinch and the adverse (not to mention compounding) effect of COVID on their investment property portfolio. With rental yields near nonexistent, and in most cases costing more than their returns, they’re coming to us to try to problem-solve how to ease the financial pressure and continue to build up their wealth and security for the future.
This is where, through our collective expertise at Development Exchange, we determine if we can unlock the hidden value (equity) within each of their property portfolios and achieve exceptional returns, capital protected, through the development of their land. Original unit blocks that are aging (20+ years old), on the outskirts of CBDs or in suburbs near the beach are often ideal candidates for redevelopment. Same goes for those standalone properties on blocks above 600sqm, or industrial areas with substantial remediation fees pending are also ideal for redevelopment.
Backed by secure lines of funding, underwritten by industry-benchmarked property insurance and supported by hard market intelligence, my team and I at Development Exchange are your development partners with a difference.
We work with you to redevelop your investment property (and/or your entire investment property portfolio) to ensure it yields above-average returns when sold, meanwhile protecting your capital. At worst, you walk away from the project with the mutually guaranteed market value of the property - meaning you’re never going to end up with less than you started with - or you could be walking away with 30%+ returns on every property that gets redeveloped. It’s a win, win for all involved.
You can read more about our process here.
All in all, we pride ourselves on our unique ability to help you build your wealth, whilst protecting your downside. Life’s too short to watch your hard earned investments underperform; our solution can help you confidently grow your property portfolio, even during a pandemic, to achieve your property goals and build real intergenerational wealth.