Bond Refund Spike Telling for Tenants and Landlords Amid Coronavirus

New data suggests the six-month moratorium on evictions during the coronavirus crisis could be holding back the flood gates when it comes to residential tenancies ending. 

But with an influx of short-term holiday rentals coming on to the residential market; an increasing number of tenants under pressure from mounting job losses and; hoards of international students leaving Australia, it’s feared there will soon be a record number of vacant rentals across Australian cities.

What’s on the horizon for renters and landlords post-coronavirus? Picture: Unsplash / Wolf Zimmerman


Research research illustrates a vacancy crisis in inner city Melbourne, while data from the same think tank shows there are currently a significant number of vacant rentals sitting on the market in Sydney’s CBD, where unit rents have fallen 14% in just 12 months.

But a realestate.com.au analysis of bond refund data from New South Wales, Victoria and South Australia shows many tenancies are staying intact, for now.

Significant jumps in bond refunds in NSW and VIC

New South Wales tenancies look to have been the hardest hit during COVID-19 with Fair Trading NSW data showing 4903 more tenancies ended in the first quarter of 2020 compared to the same period last year. Fair Trading NSW was unable to provide realestate.com.au with figures for April.

Figures from the Victorian Premier’s Office, obtained by realestate.com.au, tell a similar tale for the state with an increase of 6376 tenancies ending in the first quarter of 2020 compared to 2019. Data for April 2020 shows a smaller increase of 406 ceased tenancies compared to April 2019, which could be a result of the Federal Government’s eviction ban announcement on 29 March.

South Australia bucks the trend of the more populous states with figures from the SA Attorney General’s department, provided to realestate.com.au, showing there were 1167 less ceased tenancies in the first quarter of 2020 compared to the same time in 2019. April 2020 also saw a decrease with 191 fewer ended-tenancies compared with April 2019.

Cameron Kusher, executive manager of economic research at realestate.com.au, said while we have seen an increase in bond returns in New South Wales and Victoria in 2020, the jump has not been as large as expected given the economic impact of business closures and job freezes.

Adelaide

Adelaide’s bond refund data told a different story to NSW and Victoria’s. Picture: Unsplash / Rawkkim


“The moratorium on evictions has certainly shielded the market from a more dire impact on the market especially when you consider that workers under the age of 30, those more likely to be renting, have been much more adversely affected by job and wage losses than older age groups,” Mr Kusher said.

Ceased tenancies could surge when eviction ban ends

While there was a decrease in the number of ceased tenancies in Victoria and South Australia in April 2020 compared to the previous months, it was more than likely due to the introduction of a six-month eviction ban.

But the question of how tenancies will stay intact once the eviction ban ends in September still lingers.

Frank Camarda, senior property manager at Ray White in Dulwich Hill, said he’s seen a huge jump in the number of people vacating their rentals since the pandemic began.

“A lot [of renters] are scared and don’t want to get stuck paying rent when they’ve got no income, so they’ve decided to move out or move in with parents so they’re not in that position,” Mr Camarda said.

He added, the number of people who are inspecting rentals on a Saturday morning has definitely dropped, too.

“The [people] that are looking are mostly looking to downsize, they want to go from paying $800 to paying $600 per week in rent,” Mr Camarda explained.

Head of property management at Jellis Craig – Stonnington, Sam Nokes, said they have seen almost double the number of renters than usual ending their tenancies in April, with a significant proportion of tenants citing COVID-19 reasons.

“We have had a few tenants who have needed to leave the country suddenly and others who have decided to move back to mum and dads,” Mr Nokes said. “Most of these have been proactive, though, people assessing their situation and moving before they get into trouble.”

Mr Kusher said that the real litmus test for the market will come once support measures such as JobKeeper, JobSeeker, mortgage repayment holidays and the moratorium on evictions are removed in September.

“The impact has the potential to be felt by both renters and landlords,” he added. “If renters haven’t seen a recovery in their income and/or don’t have jobs to go back to then they won’t have the ability to pay current rents and will have to look for alternative accommodation.”

Landlords could also feel the pinch

While a lot of focus has been on renters amid COVID-19 disruptions in the real estate sector, landlords have also been heavily impacted by the loss of income when tenants, who have lost their jobs, cannot pay their rent.

A huge percentage of Australia’s landlords are mum and dad investors that rely on rental income for their livelihoods and many will be suffering under the current circumstances.

Mr Camarda said around half the rental properties under their management were owned by mum and dad investors that rely on rental income to pay their own mortgages and living expenses, while 20% of that number are self-funded retirees.

“A lot of tenants think the landlords will be okay because the banks are offering loan freezes, but the reality is that the landlords will still have to pay back the loans with interest,” he said. “The landlord hasn’t benefited from the same kind of support that the tenant often has.”

“There’s going to be a lot of landlords that are really strapped – some who have lost their jobs, too.”

Mr Kusher said we could see some landlords having no option but to sell their investment properties.

“Even if a landlord doesn’t have to sell, the loss of rental income could have a severe and ongoing impact on their finances.

“With the reduction in incomes post-September, it looks likely that there will be a reset in rental markets with renters unable to afford previous prices and landlords having little option but to reduce prices to keep their properties tenanted.”

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