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A “no vacancy sign” has been hung over regional Australia, as the coronavirus crisis sparks an exodus of city dwellers seeking lower-cost housing or a lifestyle change in the country or on the coast, experts say.
With the number of empty homes soaring in capital cities but falling to unprecedented lows in many regional areas, would-be renters are being forced to offer 10% or even 20% over the asking price just to make the shortlist of applicants in sought-after regional areas.
Prospective tenants are even offering three months’ rent upfront to secure their place at the top of the queue.
But as the flight from cities threatens to turn the Australian property market on its head – and in turn possibly prove disastrous for the country’s army of negatively geared investors – the working from home revolution is enabling many professional people to consider a change to regional living that could wreak a significant and long-lasting change on Australian society.
Louis Christopher, founder of investment research firm SQM Research, published figures this week showing a marked divergence between rental vacancy rates in urban and regional areas. In Melbourne, residential vacancies have doubled to 4% since March, with inner-city areas worse hit and the CBD seeing a tripling of the rate to nearly 9%. Sydney’s inner-city rate has increased nearly three times to 12%.
Outside the cities it’s a different story. On the New South Wales Central Coast, rental vacancies are at 0.5%, and it’s the same in south-western Victoria, Cairns in Queensland and even north Adelaide, Christopher says.
“The no vacancy sign has been put out for regional Australia,” he says. “Many areas have vacancy rates under 1%, which has never happened in our data and I’ve never seen in my career in this market. It’s quite incredible.
“But it’s good for regional Australia. It means more housing and more development [will] allow those areas to grow. It could be a trigger to see more long-term growth prospects across Australia.”
Behind the raw numbers, a paradigm shift is in the making for those lucky enough to take advantage of the changes forced by the pandemic.
Caroline Bartle, who works for a software company in Sydney, is about to buy a farm in a remote part of NSW between the state capital and Goulburn as she makes the most of a permanent shift to remote working.
“I thought, why am I paying these high prices for rent?” says Bartle, who currently rents a property with her partner in inner-city Beaconsfield. “The cost of property is ridiculous, the cost of living is high.
“On a personal level, I’ve just turned 40, so what am I going to do for the next 40 years? I thought of new challenges like growing food, keeping livestock. I also hope to have more connection to community.”
The lifestyle factor is also a significant driver for Steph, a 35-year-old media professional who is reassessing her need to pay high rent for the modestly sized apartment she shares with her husband in Chippendale in Sydney.
“Our apartment has enough space but now we have two home offices it feels less spacious. On top of that, the rent feels exorbitant when all the attractions of the city are shut down. So it’s a chance to live where we want within Australia for the first time in our lives. Why not take the chance? It’s a lifestyle change.”
However, her search for a new rental on the coast has revealed the ferocious competition created by so many people quitting the city. After several unsuccessful bids, she has finally managed to get to the last four in the race for a place at Bulli, just outside Wollongong.
“You have to apply first because it’s so competitive,” she says. “But everyone is offering more rent or three months’ rent upfront. We offered $30 or $40 more per week than the asking price but still got rejected. We just offered $50 more per week which is not much less than we are paying in the city but it’s a bigger place with three bedrooms.
“Everyone is a different case, but the one similarity is that everyone is doing it. Sounds like we’re competing with 30 applicants each time.”
Although the shift is an unexpected boon for regional economies, urban areas face a more uncertain outlook, with an increasing number of landlords left holding empty properties for which they can’t find tenants.
Commercial landlords are also suffering because of the dearth of people in city centres.
John Gilmovich, president of the Property Owners Association of NSW, says many of his members are having sleepless nights because of the tenant shortage, which has been exacerbated by the loss in the pandemic of Australia’s regular influx of tens of thousands of immigrants coming to work or study.
“It’s not good news for landlords,” he says. “There will be a section who are in financial distress. If they bought properties with negative gearing in the last two or three years and are highly leveraged they will be hurting. They never envisaged going into their own pockets to keep it afloat.”
Property owners, many of them so-called “mum and dad investors”, have a fine line to tread, he says, helping tenants who might have lost their income, but still requiring sufficient rental income themselves to keep their heads above water.
“I had one client who was losing sleep and panicking, thinking they had to sell. But it’s not a great time to sell. All of a sudden you’ve got these ordinary investors who want out because they can’t bear the stress.”
Christopher, however, thinks there are signs that the flight from the cities might not last much longer. House sales have not spiked in the same way as demand for rental properties, he says, suggesting that most movers have been renters who will be able to up sticks again if necessary. In addition, rent values are rapidly converging in some parts and city life is becoming more attractive again as more entertainment venues reopen.
Amenities, family and work requirements will always pull people back to the cities, he argues.
“Some people moving out will find it difficult to find a suitable property because there just aren’t many available, so we might even be getting close to the peak.”
Source: The Guardian
Keyword: Getting out of town: Australians rush to rent in the regions | Australia news