While the impact COVID-19 has had on consumer confidence regarding the housing market has been well documented, with caution stalling activity and transactions on the decline, the pandemic has also “uniquely impacted” demand for rental accommodation; however, according to the ANZ CoreLogic Housing affordability report, the trajectory of Australia’s overall housing market over recent years may have helped position the rental market to weather the pandemic better than could have otherwise been expected.
Demand for rental properties has fallen over recent months due to the disproportionate loss of income in industry sectors where workers were more likely to be renting, as well as the closure of Australian borders to international travellers and migrants. Subsequently, rental prices and listings have both decreased.
“One of the most impacted sectors of the housing market amid COVID-19 has been the rental market,” said CoreLogic head of research Australia, Eliza Owen.
“Due to a mixture of negative demand and supply shocks, rental market conditions weakened over April to June. This came off the back of an already ‘weak’ rental environment, where annualised growth in rents has been subdued at 0.9% across the capital city markets for the past five years.”
However, also over the last several years, investors have been withdrawing from the housing market due to tightened lending conditions designed to limit potentially risky housing lending.
According to the ANZ/CoreLogic report, it is actually “fortunate” that in the lead up to COVID-19, investment participation in the property market was correcting from very high levels. With more property having been purchased by owner-occupiers, the risk within the market was reduced as they typically are less likely to offload property assets amid economic uncertainty.
“Before the onset of the pandemic in Australia, investor participation in the housing market was at its lowest since 2001. Investor finance fell sharply over April and May due to high levels of uncertainty. If sustained, this suggests that the decline in demand for rentals could be partially offset by a decline in the supply of rental property," Owen explained.