Rental markets are currently by their very nature more volatile than the owner occupier housing market. For one simple reason; it’s usually easier and quicker to move house.
However, because of its size, as more than 305,000 people rent their homes, trends in the rental market are interesting, and they can often highlight future trends in the wider housing market.
To get some insight of what’s been happening, figures published by the NSW Rental Bond Board give some clues to activity over the past six-months. The figures also give an alternate perspective of the rental market in NSW and may be of interest to current or future residential investors.
As a starting point there’s some evidence that the total number of people leaving rental accommodation has in the past six-months, increase based upon the number of bond refunds over Q1 & Q2 2019-2020.
Refunds occur when people vacate their existing accommodation and there would always be for a variety of reasons as diverse as simply relocating to new rental housing, buying a property, moving into share accommodation or moving interstate.
Here’s what the figures reveal.
By comparison between Q1 of 2019 and Q1 of 2020 there was an increase in bond refunds of 4,899, but the variation was much more evident in Q2.
The difference between Q2 of 2019 and Q2 of 2020 was a big increase in refunds to 10,014 possibly highlighting increased financial pressure or a much bigger movement between rented homes because of the much reported impact of COVID-19 on the rental market.
Another set of interesting facts from the Rental Bond Board figures are the number of new bonds lodged by comparison between Q1 & Q2 2019 to 2020. The highest number of new bonds was recorded in July 2020 with 34,559 lodgements and that’s possibly because of the impact of COVID-19 as peoples’ circumstances changed.
While the lowest number of lodgements was in April 2020 at 25,324 notable because this was at the start of the work from home trend and in the early stages of the pandemic.
However, one of the most relevant figures comes from a comparison of the average number of new bonds lodged in Q1 and Q2 of 2019 and Q1 and Q2 of 2020.
The average for Q1 and Q2 in 2019 was 24,266 bonds per month. While in Q1 and Q2 in 2020 the average had jumped to 30,829 per month an averaged increase of 27% showing that there was a very big jump in tenant movements March to August 2020.
The begs the question as to why there was so much movement by comparison to 2019.
One trend comes from a look at what style of rented accommodation was involved and it can be seen that between February 2020 and August 2020 there was a shift in the demand of around 6% more demand for 2-bedroom apartments away from 1-bedrooms.
It would, however, appear that while some tenants might have moved because they were after more room as they were working from home, the biggest motivation was financial as rentals came under pressure, and next week I’ll examine that possibility in detail.