In the fourth Podcast in our Covid-19 specials recorded on Monday we turned our thoughts to focusing on the impact to landlords, tenants and those selling property. NSW and QLD have released their packages for assistance to landlords and the residential market was rocked last week by Consumer Affairs Victoria announcing that open for inspections for occupied homes would be banned. Victoria has since backtracked and reversed these restrictive regulations yesterday.
In this episode David Johnston, Cate Bakos and Peter Koulizos take you through:
- Restrictions on landlords – as the state governments enact ‘no evictions’ for non-payment of rent, preventions on rental increases and inspections done via video conference.
- What to do if your tenant is unable to pay rent – if you have a stable income, now is the time to refinance to reduce repayments, get on a lower rate, consolidate debt, access equity to increase your liquidity bridge to get you through to the other side. Be clear on your landlord insurance and what it does or does not cover. Get on the phone with your lender and swap to interest only – ASIC has updated their responsible lending guidelines to allow for this. Repayment pauses are available and should be an option of last resort as most lenders are capitalising interest.
- Tenants who are falling through the cracks – international students, those on temporary visas and people casually employed for less than 12 months do not meet JobKeeper and Jobseeker criteria.
- Regulations for commercial rentals – if your business has been impacted by Covid-19, your rent must be decreased by 50% of the revenue lost, if you have lost more than 30% revenue, with 2 years to make up the difference.
- The longer-term impact to the commercial rental market as businesses successfully work from home.
- Lack of regulation for residential rentals as the rental market takes a dip – landlords encouraged to cut a deal with their tenants and real estate agents left to decide how this process is managed. Anecdotally, rents have decreased by 5-15% due to decreasing demand. On the supply side, Airbnb and other properties which were short-stay rentals are set to come onto the market in droves.
- Increasing difficulty to sell – as Consumer Affairs Victoria has quickly revoked their regulation announced last week that occupied homes could not host open for inspections.
- And of course, our ‘gold nuggets’!
We wish you and your families the best of health and say a big thank you to all our health workers during this time.
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Covid-19 resources
- Is Australia flattening the coronavirus curve? Look at the charts …
- Scott Morrison says the coronavirus curve is flattening. Are we turning the corner?
- No breach for lenders as homeowners switch to interest-only
- Insights from one of the PM’s key economic advisers including turning point predictions!
- The landlord’s guide to surviving the pandemic
- Buying and selling property during coronavirus
- PM’s plea falls on deaf ears in dog-eat-dog commercial property world
- Airbnb declared illegal in NSW
- Property Planning Australia is here to support you as we have since 2004 | Property market update
- Peak Virus: Forecasting the Peak in COVID-19 Infections in the US and Australia
- Covid-19 – Relief from loan repayments
- Covid-19 and the Property Market
- How Will The Covid-19 Virus Impact Property In AUS?
- How is COVID19 impacting property?
- Coronavirus impacts on the Canberra property market
- Safe as houses – Covid-19
- Treasury – Economic Response to the Coronavirus
- Treasury – Supporting Individuals and Households
- ATO – COVID-19 – early release of superannuation
- ATO – COVID-19 – temporarily reducing superannuation minimum payment amounts
- ATO – Boosting cash flow for employers
Resources:
- Why your approach and assessment of risk is paramount to property success! (Ep.10)
- How mortgage strategy shapes your ability to hold property, and grow your wealth for decades into the future! (Ep.24)
- No mortgage strategy – #4 of the top 7 Critical Mistakes (Ep.34)
- Money Management – 7 steps to success (Ep.30)
- Mortgage Strategy 101 – Ep 5. Risk Management
- Four critical mortgage offset strategies!
- Mortgage Strategy 101 – Ep 6. Offset Optimisation
- Why short-term investing has long-term consequences
- Hold Or Fold: Why Smart Home Owners Should Keep A Cool Head When The Property Market Starts To Dip
- When to hold and when to fold (Ep. 18)
- How our mortgage strategy helps us to hold properties
- Mortgage Strategy 101 – Ep 3. Holding Property
- Why your Mortgage Strategy is more important than your interest rate! (Ep. 9 )
- Choosing whether to hold or sell investment property
- How to succeed with Property and Create your Ideal Lifestyle
- Mortgage Strategy 101 – YouTube video series.
Show notes
- Residential landlords and tenants – regulations are governed by each state. Restrictions placed on landlords include: no evictions for non-payment of rent, preventing landlords from increasing rent, video inspections, extended time for landlords to organise maintenance.
- If your tenant can’t pay:
- You could take the case to tribunal, however they are likely to come up with a repayment plan for a small amount per week.
- Cut a deal with your tenant, which is largely what the Government advice has been so far. Allocate a period of time, what is your tenant able to pay? It may be 50% of rental with the back log to be sorted out later.
- Agents are left to determine how they manage this situation – how the tenant demonstrates job lost or hours lost, eg: seeking a letter from the tenants employer.
- Refinance – your first port of call (if you have stable income) – you can consolidate your debt, reduce repayments, access equity to build your liquidity bridge and a better rate. ASIC now allow swapping to interest only from principle and interest – although lenders haven’t come out with their approach on this, you should get on the phone to your lender. Taking advantage of repayment pauses is not an ideal scenario, this is the last option you want to take as most lenders are capitalising interest.
- Ensure that you understand your landlord insurance entitlements – be familiar with the terms for rental default and what is your level of cover?
- Who is falling through the cracks? Temporary visa holders, such as international students and workers are not eligible for Centrelink assistance. In addition, the JobKeeper initiative to help businesses keep their employees does not apply to casual workers who have been working for less than 12 months.
- Commercial landlords – the code of conduct: under the code, a business would be eligible for rent relief if it has suffered a 30 per cent economic hit because of the coronavirus pandemic and it received JobKeeper wage subsidies.
- As foreshadowed, the rent reductions would be proportionate to the loss a business has suffered. Rental waivers must make up no less than 50 per cent of the proportion of which the qualifying tenant’s revenue has fallen.
- The tenant is given two years to catch up on rent, but rent cannot be demanded if it would threaten the viability of the business during the recovery phase.
- The long-term impact to commercial property – rental and ongoing terms and options can underpin value of commercial property. The link between rent and value is stronger for commercial than it is residential. In addition, there will be larger pullback for demand for commercial property as more people will be successfully working from home, which could become the permanent ‘new normal’.
- Property sales – it has become increasingly difficult for landlords to sell a property which is tenanted. If tenants don’t want the risk of Covid-19 in their property, they are protected. Prospective buyers and agents are finding it hard to get through that property.
- Last week, Consumer Affairs Victoria announced no occupied properties can be inspected by anyone other than an agent. This announcement has been retracted quickly after an intense few days of lobbying by property market professionals.
- Rental market– rents have been lowered between 5% and 15%, as demand let’s up and supply increases. This is expected to drop further as time goes on, with more property expected on the market after leases expire and the short-term rentals come into the long-term rental market. Key player in holiday rentals, Airbnb, has been declared illegal in NSW, as the government urges citizens to stay at home.
Cate Bakos- The Property Buyer’s Golden nugget: Take advantage of Dave’s suggestion to talk to your lender to adjust principal and interest loans to interest only, because it will make an enormous difference to cash flow, even for short-term.
Peter Koulizos– The Property Professor’s Golden nugget: When negotiating with tenants, you need to consider their side and where they’re at, remember we will all be negatively impacted, we need to work together to come up with solutions that work for both parties.
