But the added supply is unlikely to be soaked up as people who have lost jobs and income are moving back in with parents, moving in with friends or dissolving sharehouses, he said.

As a result, asking rents have started to drop in major cities. SQM Research figures show asking rents for houses in Sydney dropped 5.7 per cent and units by 3.7 per cent over the month to April 20.

In Melbourne, asking rents for both houses and units fell 2.4 per cent while Hobart's rents were now 4.7 per cent lower.

We're being attacked from both directions — sales continuing to dry up and rents not being paid. — Douglas Driscoll, Starr Partners chief executive

"I think this is just the beginning of a sustained decline in rents as demand continues to sink at a time when supply is rising," said SQM Research managing director Louis Christopher.

"We're likely to see huge increases in rental vacancy rates as the year progresses.

"Even if we start seeing some restrictions lifted in May and get a V-shaped recovery in the housing market, it still won't help the rental market because of the demand and supply imbalance.


"It's a bad time for existing property investors right now because it's not a good time to sell and it's hard to get a tenant.

"I think the rental market is in a lot of trouble."

Real Estate Institute of NSW CEO Tim McKibbin said the industry is facing an unprecedented, volatile and uncertain rental landscape.

"We are in uncharted waters for the rental market," he said.

"The six-month moratorium on evictions will likely cause more tenancies to be given up as people move in with other family members."

The rental arrears that may result from the government's moratorium on evictions could push many agencies into financial difficulties, said Starr Partners chief executive Douglas Driscoll.

"Rent roll is the lifeblood of most real estate businesses," he said.


"Many agencies rely on their property management income when the sales market is tough.

"Now if you have a situation where a lot of tenants were not paying their rent, then the agent clearly can't charge fees on a rent that's not being paid.

"This is a big a threat. We're being attacked from both directions — sales continuing to dry up and rents not being paid."

With most real estate businesses operating on shallow margins of around 15 per cent, Mr Driscoll said falling sales transactions and growing rental arrears were likely to push many agencies to the brink.

"Let's face it, with a large drop in sales and a serious change in the income from property management, we're likely to see a very vast majority of real estate business operating in the red. I just don't see how they could stay afloat," he said.