Investors sell up as rental stress rises

One in three renters face housing stress and are at risk of defaulting their rental payments, while more investors are selling their rental properties before prices drop even further.

The number of tenants who are struggling to pay rent, mostly due to a loss of income as a result of the lockdown, has climbed by 4.3 per cent to 1,796,216 nationally in less than two months despite the JobKeeper and JobSeeker assistance, a new report shows.

The data compiled exclusively for The Australian Financial Review by Digital Finance Analytics also showed the number of stressed Sydney renters has jumped by 16.4 per cent to 447,535 tenants compared to seven weeks ago when the data was last analysed.

Sydney's western suburbs of Bidwill, Blackett, Dharruk, Mount Druitt, Tregear and Whalan accounted for the highest proportion of distressed renters, with more than three in four (76.9 per cent) struggling to pay their rents.

Even renters in affluent suburbs of Maroubra and Pagewood were not immune with two in five renters (40.5 per cent) experiencing rental stress.

Digital Finance Analytics defines households, whether mortgage-holders or renters, as being in housing stress when their income is less than their overall expenses.

In Melbourne, the number of tenants in housing stress rose by 7.1 per cent to 352,690 renters or more than one third (35.3 per cent) having difficulty paying their rents.

Renters in Ballarat, Black Hill, Mount Helen, Sovereign Hill were most exposed with nearly three in four (72.6 per cent) likely to fall behind their rental payment.

It was a similar scenario in Brisbane, where more than one third (36.5 per cent) of tenants were likely to miss their rental payments.

Digital Finance Analytics principal Martin North said the government assistance appeared have had little impact on renters financial situation.

"Many households renting are facing difficult decisions as their finances come under pressure as a result of the virus, and before that flat income and rising costs," he said.

"We're seeing a rise in students without income, who are unable to pay rent, while some households are moving back with families or friends or a shared house to reduce their exposure.

"Others are seeking rental holidays, meaning rents will need to be paid later in arrears. Some landlords are choosing to take lower rent payments to assist, while others are taking a harder line."

Across the segments surveyed, young growing families struggled the most, including professionals who have their income reduced.

Renters in outer ring areas were also likely to default on their rents as well as young affluent tenants who lost their incomes.

Investors to sell up

As the risk of rental arrears rise, Mr North said more investors are likely to offload their investment property.

"Despite record low interest rates and mortgage reprieve by the banks, almost one in eight investors (12 per cent) are seriously considering selling up before prices and rents fall further," he said.

"In April, only 8 per cent of landlords were thinking of putting their rental homes for sale."

Mr North said as more investors struggle to cover their costs as rents fall and vacancies rise, more rental properties are set to come into the market, which could put downward pressure on property prices.

"I think the rental sector is facing a major shock, now, but one which will reverberate down the next couple of years and adversely impact the financial status of many households," he said.

"From those renting, caught by cash flow issues, through to property investors who are waking up to the fact the property investing is hard work."