Short-stay “apocalypse”

By Meg Hill

The rental market in Southbank and surrounds is flooded due to the coronavirus (COVID-19) pandemic related collapse of the short-stay market, according to real estate agents and short stay operators.

Reports from apartment-based markets in the CBD, Southbank and Docklands all show a similar trend, with a rush to move short-stay apartments into the rental market.

Ray White Southbank principal and director Andrew Salvo said there had been a flood into the rental market.

“It’s mainly the larger short-stay accommodation companies. We had one hotel operator that had about 500 short stay apartments they were subletting arrangements on and they pretty much just closed their doors,” he said.

“We had about 50 on our books and the operators just left the furniture and everything in them. We managed to rent them out pretty quickly, but it required rent reductions around 10 to 20 per cent.”

Mr Salvo said Ray White Southbank had actually experienced a record leasing month with the rise in supply, even though demand had sunk.

“We don’t have borders open, we don’t have interstate migration and we really benefit from that in this area in normal times,” he said.

“The people moving are people in the area looking to upsize, to take advantage of the change in the market, and we’ve actually been able to lease about 65 properties this month.”

“That’s not because there’s a high number of tenants looking, there’s a high supply. We usually run off an average list of 30 properties up for rent and that’s pretty much quadrupled in the space of a few weeks.”

Tony Penna, a short-stay operator in Southbank, said he had 30 empty properties he was trying to move into the rental market.

“There’s literally no revenue, every booking I had for the next three months is cancelled. I’m absolutely trying my best to put medium- to long-term tenants in them as fully furnished apartments,” Mr Penna said.

“When you look online for two-bedroom apartments in Southbank there’s around 800 already available.”

“There’s definitely a saturation of rental properties going onto the market, and many are fully-furnished so you’d guess they’re likely from short-stay.”

Mr Penna said another possible sign of the collapse of the short-stay market was a significant increase in hard waste around the city.

“There’s hard waste flooded with furniture that appears to be from short-stays all around Southbank,” he said.

“The test will be how many short-stay operators can sustain themselves for this period, and what the market will look like on the other side.”

Real estate agents have reported the same trend in the CBD.

Belle Property’s Carlton and Melbourne business development and leasing manager Suzie Inglis said the CBD market was “absolutely flooded mostly with furnished properties that would usually be on Airbnb and other short term stay platforms”.

Ms Inglis said on April 21 there were over 2200 apartments online in the CBD alone.

“In our busiest period this number will usually never exceed 1200, so you can clearly see the huge and rapid increase happening,” she said.

“The 1000 extra properties are all furnished and have all come online in the last two to three weeks which is simply unheard of.”

“This heavy competition teamed with the fact there are hardly any prospective tenants in the market anyway has forced owners to significantly drop prices in order to be competitive.”

Rus Littleson, a representative of property owners and long-term resident advocacy group We Live Here, said COVID-19 was an “apocalypse for the whole short-stay industry”.

“We have residents telling us that short-stay operators are collapsing throughout the city,” he said.

“Short-stay companies that have been around for more than a decade have not been immune - they’re crumbling under the pressure of paying above-market rents with near-zero income.”

“We Live Here is hearing that short-stay operators are invoking the small print in their rental agreements and bailing out, abandoning their apartment owners in the long-term rental market.” •

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