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As the country continues to work through the effects of the coronavirus pandemic that included an economic recession, many real estate stakeholders are eager to understand what 2021 holds for the industry. According to the Reserve Bank, the economic downturn has significantly affected renters, ensuring that rental price growth in 2021 will remain subdued. This is because advertised rents have reduced since the pandemic started, with inner-city dwelling markets affected the most as many who live there experienced the most significant financial impact. 

At a granular level, support for tenants – whether in the form of income support measures, land tax discounts, or moratoriums on evictions – has helped cushion tenants with existing residential leases from the financial strain. Data from property management platform MRI shows that about 15 percent of tenants received some form of relief. Additionally, the Reserve Bank foresees lower population growth as a factor for the subdued rental growth. 

Such information is useful to property investors and developers such as Michael Akkawi, who all want an indication of what to expect in the property industry after the pandemic. 

Improved Rental Availability 

While reduced rental growth might lead to stagnant returns for property investors, the flipside is that rental affordability across the country improved to its best results since 2007 according to the Real Estate Institute of Australia (REIA). The rental affordability improvement was noted across most states and territories in the second quarter of 2020 and meant that the proportion of income needed to meet rent payments also decreased. 

Increased vacancies and rental discounting have been the major trends since Australia closed its international borders in March 2020. The inner-city markets in Melbourne and Sydney were among the hardest hit, given that many renters were likely to be employed in sectors greatly affected by the pandemic. Thousands of students have likely foregone rental accommodation, while Airbnb listings have gone up due to the travel ban.  

Better Fortunes Ahead 

Economists predict a better 2021 for the housing market, boosted by government stimulus efforts, low interest rates and a recovering economy. Nationally, home prices may rise by five percent. However, in a continuing spotlight on inner-city markets, their prices will fall as more city dwellers choose to move to regional areas. In Melbourne, for example, this reduction could be by as much as five percent.  

Melbourne and Sydney are expected to display property price discrepancies across the year, given they are more vulnerable to immigration. Regional towns within a two-hour radius of the two cities could stand to gain, as economists foresee price growth of up to ten percent, mainly due to people’s changing attitudes to working from home.