Most commentators are predicting that rents will drop in the coming months due to less tenant demand and more supply.
According to Domain figures, the number of rentals hitting the market was up 18 per cent in early April compared with the same period last year.
So, will this apply across all rental markets, and which rental markets will be most affected?
Tourist hotspots
Areas like Port Douglas, Gold Coast, Sunshine Coast have long been a hotspot for Airbnb and short-stay accommodation servicing a short and medium-term international market.
Typically some of Australia’s strongest rental markets, now the areas are experiencing an oversupply. The exodus of tourists coupled with the short-term rental ban has forced landlords to seek longer-term tenants.
Many rental properties are vacant, forcing landlords to discount their rent to attract tenants.
While the good news is that this situation is temporary, the bad news is we don’t yet know when Australia will reopen its borders.
There are signs that restrictions on domestic tourism may be relaxed in the coming months and international travel between Australia and New Zealand may even be permitted.
However, it is unlikely that tourists further afield will be able to enter the country until the virus is contained in more countries or until there is a COVID-19 vaccine. Once international travel recommences, we should see those markets bounce back quickly.
The impact of international students on specific rental markets
Over 100,000 international students currently enrolled in Australian educational institutions have been unable to enter Australia. Many of those that are here cannot support themselves and have been encouraged to return home.
As is the case with tourist accommodation, the exodus of international students has also created vacancies and oversupply. Landlords holding properties near universities in Brisbane, around QUT, UQ, or Giffith University, which usually attract a high percentage of international students, are now on the hunt for tenants and may be forced to discount rents.
Until international students are able to return, the rental market is likely to be affected significantly more in these locations.
Areas with high unemployment
While government stimulus and rent relief measures are largely cushioning the economic impacts on many renters and saving them from not being able to afford their rent, in some areas it may not be enough to protect the rental market.
About 30 per cent of Australians rent their homes. Many renters are younger and fall into a lower income bracket. Many are casual workers, often in industries most affected by COVID-19 such as hospitality, retail or travel.
Not all will be eligible for stimulus like JobKeeper, for example, if they have been employed casually for less than 12 months. Areas with a concentration of renters in these circumstances will be more affected.
Areas with a high concentration of investors
Locations with a high supply of investors and renters will also fall harder in difficult times, especially when compared with tightly held markets with a high percentage of owners and limited rental supply. These areas can be vulnerable to oversupply already, and this will be exacerbated by the current circumstances.
Will the rental market collapse?
At this stage, the majority of rental markets around the county are holding up reasonably well, as most property managers we surveyed have reported that approximately 90 per cent to 95 per cent of tenants are continuing to pay their rent in full.
Given the government assistance to both tenants and landlords during this period, it’s unlikely we’ll see a situation where a flood of rental properties hit the majority of our property markets.
While some markets will inevitably be impacted more than others, as mentioned above, it’s important to remember that property markets with a high proportion of owner-occupiers rather than investors are less likely to suffer falls in rental demand.
FREQUENTLY ASKED TAX QUESTIONS FOR RENTAL
PROPERTIES AFFECTED BY COVID-19
My tenants are not paying their full rent or have temporarily stopped paying rent because their income has been adversely affected by COVID-19. Can I still claim deductions on my rental property expenses?
The simple answer is Yes
If tenants are not meeting their payment obligations under the lease agreement due to COVID-19 and you continue to incur normal expenses on your property, then you will still be able to claim these expenses in your tax return.
I’m considering reducing the rent for tenants whose income has been adversely affected by COVID-19 to enable them to stay in the property. The tenants are not in default of their rent. Will my deduction for rental property expenses be reduced because of this?
The simple answer is No
If you decide to reduce the rent to enable your tenants to remain in the property (thereby maximising your rental return in a changed rental market), your deduction for rental property expenses will not be reduced.
If I receive a back payment of rent or an amount of insurance for lost rent, is this amount assessable income?
The simple answer is Yes
These amounts should be declared as income in the tax year in which you receive the amounts.
If the bank defers loan repayments for a period of time as a result of COVID-19, can I continue to claim interest on the loan as a deduction?
The simple answer is Yes
If interest continues to accumulate on your loan, it will be an expense that you have incurred and is therefore deductible. Interest remains deductible on the loan even if the bank defers the repayments.
Can I access the new instant asset write-off for my property?
The simple answer is No
If you are a property investor, you cannot access the instant asset write-off deduction.
How the instant asset write-off deduction works
COVID-19 $150,000 instant asset write-off, tips & traps blog
Which rental markets are most impacted by COVID-19?
Best Regards
Linda 姬琳达珍 and Carlos Debello (LREA)
LJ Gilland Real Estate Pty Ltd
Debello LREA推荐书LJ Gilland房地产
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Our Valued Vendor wrote the following to one of the potential buyers for this sale, for which we are thankful and grateful:-
This part is a note for the possible buyers. Carlos and Linda have managed three of our properties and, to date, been the agents for their sales as well. We are not natural landlords, but when Carlos and Linda manage the properties, they treat them as their own. It has been their diligence and sense of ownership that has enabled us to handle investment properties. If you proceed with this purchase, we recommend that you keep them on as rental managers until the process is complete. They managed repairs and maintenance on all properties so that they were never a worry. They know the property and the tenants, are very familiar with the laws of the tenancy and therefore would be able to steer through the process of giving notice and the final weeks the occupancy. They are very diplomatic and appreciate the challenges of dealing with people. We have no concerns about the future because of the amazing ability of Carlos and Linda.
Regards Rod and Kathy>
Solid Sale In An Extraordinary Time
It has been a pleasure to have Linda recently sell a rental property in Ormiston, Brisbane, for us. Considering the contract went through during Covid-19 Lockdown, it says a lot about Linda’s commitment and tenacity.
The experience highlighted the following for us about Linda.
She:
(a) has a great understanding of the market and property values
(b) is extremely helpful and honest in her comments and guidance
(c) follows up diligently and follows through with information and progress
(d) is committed to the buyer or seller
We are thrilled that the sale was completed and thank Linda and Carlos for managing the triple issues of tenants, seller and buyer so superbly.
Review submitted by Rod & Kathy Jarrett (vendor) on 07 May 2020 https://www.ratemyagent.com.au/real-estate-agent/linda-debello/reviews/18-evergreen-st-ormiston-aast11
Property in Capable Hands
Through the purchase of this property I’ve had the pleasure to meet Linda whom I’ve come to know as a very genuine person with in-depth knowledge about the current market and is very dedicated and passionate about her work. With her guidance the entire purchasing process was extremely smooth and hassle free.
This property had tenants prior to my purchase and has been managed by Linda and Carlos since it was nearly new. I feel very privileged and assured to have Linda and Carlos continue looking after this property for me.
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