Spike in NSW tenants moving out of rentals amid coronavirus pandemic, data shows

Journalist

The number of renters leaving homes across NSW has already spiked amid the coronavirus pandemic, new figures show.

Tenants across more than 26,500 rental properties got their bond back last month, data shows, with a large jump in those handing back the keys after fewer than 100 days in a property.

Figures from NSW Fair Trading show residential bond refunds jumped 7.5 per cent over March, and were up 17 per cent year-on-year, while new bond lodgements were up just 3.2 per cent over the year.

“It’s an interesting early bit of evidence about what could be a significant impact on the state of the market,” said Chris Martin, of the City Futures Research Centre at the University of NSW.

While rental bonds can be released for a variety of reasons, including the end of a lease period or breach of agreement, Dr Martin said COVID-19 and its economic impacts were the prime suspect for the spike.

He said April figures would paint a better picture of the impact of early job losses, noting the number of homes vacated could increase as more tenants grappled with reduced incomes.

“This is going to go on for some time, and [people who are worried] that they may not have the same job to come back to would be thinking about whether they can afford to stay in the same house,” Dr Martin said.

March also saw a sharp rise in the number of bonds held for 100 days or less. These shorter tenancies for houses, units and terraces were up 30 per cent from February and 46 per cent year-on-year, with the biggest jump in those ended within 25 days. However, these leases still made up the minority of tenancies ended at 4.2 per cent – up from 3.3 per cent the same time last year.

Domain economist Trent Wiltshire said there had been increased churn in the rental market, with tenants responding quickly to job losses due to weeks of uncertainty around government support for tenants and landlords.

As many as one in six Australians have already changed their living arrangements due to the pandemic, a recent St. George Bank Property Monitor survey revealed, with people moving in with family or friends, taking on additional housemates or moving to more affordable properties.

Mr Wiltshire said households would continue to consolidate as the economic downturn led to more job losses – in effect reducing rental demand at the same time as supply was increasing.

New Sydney listings were up 15 per cent in the four weeks to April 19, as short-term holiday rentals and homes previously for sale returned to the rental market. Mr Wiltshire expected this would push the vacancy rate – at 2.7 per cent in Sydney last month – higher in the coming months.

Apart from revealing the length and cost of a lease, the data also shows how much of a bond was refunded to a tenant and landlord or agent. The number of households who lost their full bond was up 16.4 per cent year-on-year, but the proportion of bonds lost remained relatively stable at about 15 per cent.

For shorter tenancies this climbed to 26 per cent of full bonds lost, but this was an improvement on the previous March. This group of renters lost $590 of their bond on average.

While the state parliment has been recalled to pass a six-month support package for landlords and tenants, the delay in a rental relief announcement created a lot of angst for both tenants and investors, said Amy Sanderson, head of property management at LJ Hooker.

“Last month was full of activity, this month it’s starting to level out a bit,” she said. “If people can’t afford [the rent], in many cases they’re thinking ‘I’m better to get out than have arrears sitting there’. That’s where that [higher] vacancy rate is coming from.”

Ms Sanderson expects this to slow as government support payments flow, and more rent reductions are negotiated where necessary.

While some tenants and landlords were being unreasonable, the majority were empathetic, she said. The increase in properties on the market was also making vacant properties more affordable.

Landlords, under the new measures to go to Parliament on May 11, have to negotiate with households that have lost at least 25 per cent of their income before they can seek a forced end to a tenancy. Some renters are still struggling to negotiate, according to the Tenants’ Union of NSW.

“The Tenants’ Union is aware of multiple cases of landlords initially stonewalling tenants’ requests for a rent reduction, or insisting on rent deferrals instead of rent reductions,” said senior policy officer Leo Patterson Ross.

“[This is] putting tenants impacted by COVID-19 in a difficult situation where they accrue a debt to be repaid as soon as the moratorium lifts or they are forced to break their lease to avoid rent they cannot afford.”

“Too many tenancies are still vulnerable to termination,” added Dr Martin, noting that if rent negotiations failed tenants still faced the prospect of being evicted.

He also feared the measures would be used to limit other tenants from having “usual market conversations” about a rent reduction in a falling market.

Michael Conolly, head of network property management at McGrath, said the number of tenants seeking rent reductions had not been as significant as expected. About 2.1 per cent of tenants nationally sought reductions in March, however he expected this would increase as more people came under financial strain.

He added McGrath had not seen a spike in lease breaks, but felt this could possibly be due to the location of their Sydney offices in more affluent areas.

Mr Conolly expected vacancy rates for small apartments would see the biggest jump as it became harder for people to live on their own.

Two-thirds of the bonds held for 100 days or less were for one or two-bedroom properties. While the median rents for these properties was $460 a week, more than 30 per cent of the houses and 40 per cent of units were priced above Sydney’s median rents.