Financial Hardship Claims Spike

Financial Hardship Claims Spike

Financial Hardship Claims Spike

Rental pressures have remained modest across most areas of Australia, with the national rental index up 0.3% over the month and 1.2% higher over the March quarter, according to CoreLogic. However, significant challenges related to Coronavirus lay ahead.

The past twelve months has seen rental rates rise by only 1.4%, which is below the rate of inflation. Across the capital cities, Hobart has shown the tightest rental conditions, with landlords lifting rents by an average of 3.4% over the past twelve months. Darwin, where housing demand and economic conditions remain weak, is the only capital city to report a drop in rents over the past year.

Rental yield compression has been persistent since values started rising in June 2019. With rents remaining relatively subdued and housing values still rising over March, this trend continues. Yields are the lowest in Sydney, tracking at a record low 2.96% in March. Melbourne gross yields, have also been trending lower at 3.2%, but remain above the previous record low of 3.07% recorded in October 2017.

Considering rental markets already have some slack, First National is expecting renewed downwards pressure on rents due to a combination of job losses and less demand from students for accommodation.

Claims of financial hardship rapidly increase

In recent weeks, all First National Real Estate offices have experienced an unprecedented spike in Coronavirus (COVID-19) hardship claims from tenants. With potentially a million or more Australians anticipated to lose their jobs or be stood-down as a result of business closures or restrictions, many of our tenants are concerned about how they will manage to pay the rent. The Federal Government has flagged a six-month moratorium on evictions related to COVID-19 hardship, with the states and territories to be responsible for implementation of the rules. At the time of writing, we await the government’s advice as to how such an arrangement will work.

How will First National respond if my tenant can’t pay the rent?

Our first priority is to assure your tenant is aware of the substantial financial support available through Centrelink as well as any state or territory government emergency assistance. We will follow all necessary procedures to assure that any Landlord Insurance policy applicable to your property is not compromised, should a claim be necessary. We will also explain that a moratorium on evictions does not mean your tenant can avoid paying the rent. If they can afford to pay the rent, they must continue to do so. If they cannot pay the rent now, a rental payment plan will be canvassed in consultation with you.

In the event that your tenant is completely unable to pay any rent, we understand the government’s intent is to apply a six-month grace period, but your tenant will be required to catch up. We will of course consult with you as the rules of the moratorium’s implementation become clear.

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