At the very beginning of the COVID-19 crisis, no one could envisage the global pandemic that would follow within just a few months, let alone the economic damage it would cause. Worldwide shutdowns have also left their mark on housing markets. As tenants are fleeing major cities, rental listings are on the rise and rent prices, in turn, going down.
For many investors, this is a real setback, as the rental income diminishes. The pandemic is having a detrimental effect for many, however, renters and real estate businesses are amongst the hardest hit.
A Sydney-based landlord Patrick Psotka has really felt the impacts of recent events. “I had approximately 20 tenants prior to the crisis, now more than half of them have left,” he says. “I have also had to drop the rents of the remaining tenants as many of them have lost their jobs and can’t afford to pay full rent.”
This situation further increases housing inequality and widens the already significant gap between people owning zero housing wealth (renters) and people with substantial housing wealth (owners).
Results of the HILDA-survey suggest that already before COVID-19, the situation of renters was very worrying in comparison to the owners. The study measures three categories of vulnerability; work insecurity, financial stress, and ill-health. According to the study, renters were doing worse than owners in all categories.
These risks are also very real when looking at the post-pandemic markets. Individuals exposed to vulnerability during this crisis will encounter a much harder battle to recover economically than those with more financial stability.
Due to this, it is also harder for these individuals to gather up savings, thus, falling even further behind in their ability to purchase a home.