If there is one lesson landlords and would-be property investors should learn from the ongoing COVID-19 pandemic, it would be to always plan for the worst.

As the pandemic continues to unfold and the risk of a potential second wave lingering over the housing market it’s a good reminder for landlords to constantly assess their investments including overall market performance and any current mortgage obligations.

More than ever it is important for landlords to be competitive with their rents in order to avoid long vacancy periods and it is particularly important that the finances of their potential tenants are thoroughly assessed.

In New South Wales we saw the introduction of the interim 60-day stop on landlords issuing termination notices, or applying to the tribunal for an eviction order due to rental arrears. This measure was introduced to allow time for Government Financial Support Packages to reach those who needed it and to limit social movement during the pandemic but this 60-day stop ended on 13 June 2020, so now what?

Tenants who are financially disadvantaged by COVID-19 (and meet the eligibility criteria) are protected by a six-month restriction on evictions. There are extended notice periods for certain other lease termination reasons and tenants financially disadvantaged by COVID-19 are able to terminate a tenancy agreement where a landlord will not negotiate or where it is necessary to avoid financial hardship.

Under the new measures, landlords must negotiate a rent reduction with an impacted tenant in good faith before seeking to terminate a tenancy, and can only give a termination notice or apply for an eviction order if it is fair and reasonable to do so in the circumstances.

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Power Shift

High vacancy rates and financial aid packages from the Government as a result of COVID-19 have led to a power shift in the market, favouring tenants, and the current market is certainly one in which renters have much more power in negotiations with landlords.

Many tenants have also sorted out alternative accommodation, like moving back in with mum or dad, or moved to cheaper rental suburbs so it is imperative that landlords continue to plan ahead and protect themselves from any additional disruptions.

Rental prices across Sydney have also seen a reduction which is likely due to a lack of demand from international rentals after international borders were closed on 20th March 2020.

Protect Your Finances

As states and territories start to reopen their economies and restrictions are gradually lifted this signals the impending termination of financial support such as JobKeeper and JobSeeker payments and the banks’ mortgage deferral option so it is crucial for landlords to recognise that the economic impacts of the outbreak are not completely over and landlords should plan ahead as if the pandemic were to hit again.

Cash flow can be crucial in business and property investment so freeing up cash in your budget can be critical. If given the opportunity, spread out other expenses like council rates, water and strata or body corporate fees by paying them in agreed increments rather than in one hit.

It is also a wise move to speak with banks about options to switch to interest-only payments to also help your cash flow.

Helping Your Tenants

Given the impacts of the COVID-19 outbreak on the jobs market, landlords are expected to continue to look after their tenants who might not be able to afford full rents and whilst this can be stressful on all parties landlords are encouraged to contact their local residential tenancy authority to see what grants, rent relief and resources are available to them to support landlords through this challenging time.

It is essential to continue to properly document any agreements or changes, leaving no uncertainties in regards to the terms and conditions of any rental deductions or waivers.

It is strongly urged that landlords approach each circumstance from a place of compassion and know that there is only ever a small minority that may try to take advantage of such terrible circumstances.

An Outlook

While it’s difficult to say exactly how much weekly rental prices will change post-pandemic and how the rental market may change, tenants are likely to try to hold on to the power gained during COVID-19.

Affordable rentals will likely continue to be in hot demand, especially as more people are and continue to experience financial hardship due to COVID-19.

Have more questions or concerns about how this will continue to impact your investment? Talk with Sonja today.

What's New In Real Estate

How COVID-19 Has Changed Renting

Power Shift

Protect Your Finances

Helping Your Tenants

An Outlook

Further Reading

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