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Increased Supply Is Occurring When We Have Weakened Demand

A report from the Australian Financial Review. “Apartment rents nationally recorded their biggest price drop in more than 15 years, with the rental markets in most capital cities suffering from the impact of COVID-19 over the June quarter. ‘For the past two years Sydney unit rents have tumbled annually as tenants benefited from heightened investor activity in previous years, as completed off-the-plan apartments add to supply,’ Domain senior research analyst Nicola Powell said. ‘The pace of decline has now gathered additional momentum. The city and east, inner west and lower north shore have felt the brunt.'”

“Amanda Gould, property investor and founder of HighSpec Properties, said she was forced to drop the rent of her two-bedroom Darlinghurst apartment significantly after her tenants moved out just before COVID-19 hit.”

“‘The only tenants who were willing to take their place wanted an $80 reduction and new carpet. So I replaced the carpet, which cost me a few thousand dollars and I took an $80 loss, so that has affected my rental yields,’ Ms Gould said. ‘I’m lucky I bought it a long time ago, so it wasn’t too bad, but if you bought in the recent years it would be very tough. This is the most I’ve ever had to drop rent.'”

“According to Domain figures, the number of advertised rentals jumped by almost 13 per cent across Sydney between March and June. Advertised rentals surged in Sydney’s city and east by 43 per cent and 29 per cent in the inner west, as landlords hoped to convert their short-term rentals to long-term ones as the tourism industry went into hibernation.”

“‘Vacancies have surged in inner Melbourne, with advertised rentals lifting 64 per cent from March to June,’ Dr Powell said. ‘This has created a discounting war, forcing one-third of inner Melbourne landlords to slash asking rents in an attempt to secure a tenant.'”

“Anna Porter, principal at Suburbanite, warned investors had to be very realistic about rental prices, or face lengthy periods of vacancy, particularly across the Sydney unit sector. ‘Investors need to get more creative if they want to avoid lengthy vacancy periods, by doing things like offering rent-free periods, a free internet connection or a six-month gym membership to a local gym if they want to make their property stand out from the rest,’ she said.”

Two reports from Domain News. “‘Rental prices fell across most major capitals, illustrating no city was immune from the impact of coronavirus, with Sydney and Hobart units recording the steepest quarterly fall on record,’ said Domain senior research analyst Nicola Powell. Inner-city areas with high concentrations of apartment buildings have fared the worst in recent months.”

“‘That’s because these areas have seen a strong lift in the number of advertised rentals between March and June,’ Dr Powell said. ‘You have to remember increased supply is occurring when we have weakened demand, driven by border closures and the halt to tourism, migration and the arrival of international students.'”

“AMP Capital chief economist Shane Oliver warned that, in the absence of a vaccine, the virus could potentially deliver a long-term hit to city rents. ‘The virus itself has made apartment living less popular,’ Mr Oliver said. ‘They’ve called them vertical cruise liners.'”

“Brisbane’s longest run of rental stability has ended, with house and units rents falling over the last three months, new data shows. The report found asking prices for apartments in the Brisbane local government area fell by 1.3 per cent over the quarter, although Eaden Hockings, of Living Here Cush Partners, said inner-city units had been hit much harder.”

“‘There are certainly pockets and areas that suffered a much greater drop than that,’ Mr Hockings said. Areas like Spring Hill, with high levels of interstate and overseas travel, had been strongly hit, he said. And demand for inner-city furnished properties in the $300 to $600 range, that often typically cater to international students, had ‘completely fallen away.'”

From Nine News. “Melburnians could see a further drop in rental prices. ‘Vacancies are likely to remain high in the coming months across metropolitan and tourist areas, which could result in further rent reductions,’ Dr Powell said. ‘Any potential renewed short-term demand from interstate travel has been curtailed as Melbourne enters a second lockdown.'”

The Urban Developer. “Property investors, struggling with falling rents and rising vacancies, now face a further cash flow crunch as the number of empty rental homes languish on the market. According to recent research from industry data provider Suburb Trends, more than 60,000 rental properties analysed across June currently sit empty for over 21 days—a 46.1 per cent jump compared with May.”

“Homes typically listed for Airbnb have also flooded into the rental market, further adding to supply. With approximately 120,000 Airbnb properties available for rent across Australia analysts also expect around 30,000 properties to transition into the long-term market amid the lockdown.

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  1. Australia is in a recession. Many of these landlords operate at a loss, have for years. It looks like a tough time ahead.

    1. Australia has been in an economic contraction for at least two years.

      Covid just accelerated it.

      1. And theyre locking down entire buildings of the poors:

        https://www.youtube.com/watch?v=gx38VLqThtU

        Funny, no lockdown in the sh!tholes they came from. Why dont they go back to their home countries? They wouldnt have to suffer such indignity there. And for the natives in those complexes – avoid drugs, alcohol, tattoos and especially getting knocked up by anyone who is into those things.

        1. To BlueSkye’s point that something else killed the economy besides COVID-19:

          The COVID-19 pandemic closures in California were the first in the country. They began on Friday, March 20. So only the last full week of the quarter (March 23 – 28) was impacted by the closure, with such impacts limited to California and any other early adopters of the policy.

          And yet U.S. GDP somehow dropped by 5% in the first quarter. ‘Tis a puzzlement!

          1. Since I happen to own a business and circulate with other people who own businesses I can confirm that business conditions started to deteriorate significantly prior to the actual lockdown order as the fear mongering was already causing a lot of people to change their habits. Ask any gas station owner when sales started falling off a cliff. It preceded the lockdown but was still mostly a result of the covid fear mongering. Maybe that helps solve the puzzle.

          2. The COVID-19 pandemic closures in California were the first in the country. They began on Friday, March 20

            To pick a nit, Nevada Governor Sisolak ordered all gaming to end by midnight on March 18, and other non-essential businesses to close by noon that day.

            This was after he “temporarily” closed schools and state offices, “encouraged employees to work from home and limited the size of public gatherings.”

            BTW, MGM Resorts, The Cosmopolitan, Wynn Resorts and the Las Vegas Sands had already voluntarily closed by the 18th.

            At the time, Nevada counted 55 covid-19 cases and one death.

            https://carsonnow.org/story/03/17/2020/nevada-governor-order-statewide-closure-non-essential-businesses-including-casinos-

  3. The humanity!!!

    “‘The only tenants who were willing to take their place wanted an $80 reduction and new carpet. So I replaced the carpet, which cost me a few thousand dollars and I took an $80 loss”

    1. I took an $80 loss

      That reminds me of government budgeting where any reduction in the expected increase to the budget is seen as a loss.

      1. Good point about the government budgeting, a lot of people are ignorant of that nuance.

        As for the $80 reduction, remember that rent in Australia is paid by the week not the month. So that was a $320/month haircut. Good for the renters, not so good for poor Ms Gould.

    1. ‘As the primary source of income for her family, she cannot afford to stop working. The Joint Center for Housing Studies (JCHS) of Harvard University found that Monterey County is one of the most cost-burdened areas in the nation, with 54% of residents paying at least 30% of their household income on rent; 25.9% are paying at least 50%.’

      ‘The price per acre in Salinas from 2012-2017 increased by 112%, from $587,600 to $1,249,200, according to the JCHS.’

      https://www.thecalifornian.com/in-depth/news/2020/07/08/california-coronavirus-covid-19-low-income-housing/5326087002/

      1. You know, if this only happened in Salinas, so what? I documented that starting around 2011, land prices doubled or tripled in a very short period of time – everywhere. Rural, urban, places you never heard of. So how can this happen and these central banks and “watch-dogs” or regulators can’t see it coming?

        The land is where the bubble is. Read this story. Garlic pickers living stacked on top of each other. Oh the MSM wails night and day about inequality, injustice. Where are they on the greed and corruption that is the REIC? They’re part of the REIC.

        http://www.rstreet.org/2017/07/24/is-the-real-estate-double-bubble-back/

      2. Salinas is an armpit. It reminds me of Greeley. 1 million an acre? It’s 8 miles from the coast.

      3. Salinas is where our famous Strawberry picker got a mortgage for a $780k shack, IIRC. The Salinas region is now a bedroom community for the San Jose – South Bay Area these days. You get on the 101 and drive South until you qualify!

        1. It is also John Steinbeck country, e.g., the “finest soil where anything will grow” West of the Mississippi.

    1. If it were only the epidemic, then I believe the “magic” of the cities would come back easily. We asked the same questions after 9/11: will people really want to live in a tower? What if someone sets off a dirty bomb in Macy’s? Well, the cities came back anyway.

      But since then, we’ve had tech, financial hijinks, and looting, on top of an epidemic. I mean, look at why people live in a city. Bar/restaurant: killed by COVID. Theater/music: killed by COVID. Transport: killed by COVID. City living: killed by high rents. Shopping: killed by high rents and looting. Office culture: killed by w@h.

      Any reason to live in a city is pretty much gone. But where are they going to live now?

      1. killed by COVID

        Of the 80,000 excess deaths this year, probably 50,000 were attributable to very poor conditions in our nursing homes. 30,000 epidemic deaths in a country of 300 million didn’t kill anything significant in the economy. Something else killed the economy.

        Canada is reeling over the realization of the horrid conditions in their nursing homes. This realization came from having Army medics go in to help. They just passed a law requiring all nursing homes to actually have air conditioning.

          1. That is an interesting point, but it wasn’t to avoid, it was to postpone, so that hospital capacity wasn’t overwhelmed. Flatten the curve, right?

          3. Not if a vaccine is discovered before we get to much farther into the pandemic.

            “If ifs and buts were candy and nuts, we’d all have a Merry Christmas.”

        2. Vietnam, population 95,000,000, deaths from CV, zero
          Laos, population 7,000,000, deaths from CV. zero
          Cambodia, population 16,000,000, deaths from CV, zero

          All three of these countries, which have medieval level health care compared to the US, were getting a significant number of travelers from China, especially Vietnam, leading up to the “pandemic”.

          Think about it. Let it sink in.

          1. We won’t need a vaccine if everybody spends all their time shopping at WALMART. Because nobody ever gets CV at WALMART no matter how many people have touched the same credit card swiper in the last hour. WALMART is SAFE. WALMART will always be SAFE. Not like your church or family BBQ. Those are very DANGEROUS conditions. You will always be IMMUNE to germs and invisible threats at WALMART. When the world is scary and you don’t know what to do or where to go, just remember WALMART is your refuge in the storm. WALMART is, and always will be, a SAFE place for you to go.

          2. I don’t know what you’re intending me to conclude, but here’s a link with information that helps explain things.

            What do you imagine the compliance rate with lockdowns, contact tracing, and mask wear is in Vietnam, compared to the US?

            “Thwaites said Vietnam’s rich experience in dealing with infectious disease outbreaks, such as the SARS epidemic from 2002 to 2003 and the following avian influenza, had helped the government and the public to better prepare for the Covid-19 pandemic.

            “The population is much more respectful of infectious diseases than many perhaps more affluent countries or countries that don’t see as much infectious disease — Europe, the UK and the US for example,” he said.
            “The country understands that these things need to be taken seriously and complies with guidance from the government on how to prevent the infection from spreading.””

            https://www.cnn.com/2020/05/29/asia/coronavirus-vietnam-intl-hnk/index.html

          3. Vietnam’s rich experience in dealing with infectious disease outbreaks

            Probably the frail were already winnowed.

    1. Don’t worry the Corrupt moran Joe Biden is going to trandform America.

      No middle of the road for this Corrupt despot Biden. Think of how arrogant this mindless empty suit is. This corrupt nut thinks his newly formed Commie ideas of overthrow of what the Framers set up isn’t a act of a un-american traitor.

      No doubt this jerk will consider China a great trading partner as long as his good for nothing son gets a kickback.

      Biden now has gone radical on what he says his agendas are going to be . That crazy old coot picking the Winners and losers of taxes that would triple, and no doubt the Globalist and monopolies would end up the winners, along with the free Cheese group of Commies and defund the Police crowd.
      Biden is a threat to National Security and the Constitution. You can see the true colors of this current movement.

      I think suffice to say that Biden represents the fall of the USA by bought off political body that has betrayed Citizens for the fringed minority, which include the rich one percent.

      These traitors have to be taken out of office . No other choice.

  8. Kanye West on running for president (July 8th):

    “That is a form of racism and white supremacy and white control to say that all Black people need to be Democrat and to assume that me running is me splitting the vote. All of that information is being charged up on social media platforms by Democrats. And Democrats used to tell me, the same Democrats have threatened me. . . . The reason why this is the first day I registered to vote is because I was scared. I was told that if I voted on Trump my music career would be over. I was threatened into being in one party. I was threatened as a celebrity into being in one party. I was threatened as a Black man into the Democratic party. And that’s what the Democrats are doing, emotionally, to my people. Threatening them to the point where this white man can tell a Black man if you don’t vote for me, you’re not Black.”

      1. Now that he’s living in Wyoming he’s probably seen as double stuffed. But that doesn’t mean his political observations are necessarily wrong.

    2. In every way the Dem party has become you get threatened or boycotted or fired for your political views.

      This is no different than how Hilter rose to power. This is the most alarming thing I have seen in my lifetime.

  9. The Financial Times
    Coronavirus business update 30 days complimentary
    Coronavirus: free to read
    The Big Read Coronavirus economic impact
    The leveraging of America: how companies became addicted to debt | Free to read
    With the corporate sector already owing $10tn, many businesses are doubling down on new loans to survive the pandemic
    © FT montage
    Mark Vandevelde in New York yesterday

    The year was 1973 and as the Vietnam war wound down, an oil embargo was threatening the very foundations of the US economy. Petrol stations were running dry and highways began to empty. At Hertz, the car rental company then known for its pioneering computerised booking system, executives realised that transport companies would inevitably be among the first casualties. Hertz’s response? It loaded up on debt.

    Within weeks of the embargo starting, Hertz was selling off the gas guzzlers that made up three-quarters of its fleet, and borrowing heavily to replace them with smaller, more efficient cars. The gamble proved wildly successful.

    The next year, as an oil price shock ravaged competitors and triggered a bout of “stagflation” as high inflation combined with low growth, Hertz’s revenues and profits hit new records. Soon, the company’s advertising department hired a young athlete named OJ Simpson and proclaimed itself “the superstar in rent-a-car”.

    Yet almost half a century later, Hertz is bankrupt, the victim of a coronavirus pandemic that has brought large parts of the global economy to a standstill. The company, which employed 38,000 people last year, and operated from about 12,000 locations, was unable to escape the weight of a $17bn debt pile. The bet that prospered in the 1970s has come unstuck in the 2020s.

    Other rental chains have taken out new loans to ride out the drought in travel bookings, but Hertz’s borrowing capacity was already spent: after 15 years of aggressive financial engineering, it owed $12,400 for every car worth $10,000. Much of the money came from complex financial instruments that allowed creditors to demand their cash back when the company could least afford it.

    Hertz’s demise has drawn attention to the relentless build-up in corporate debt in the US, where companies now owe a record $10tn — equivalent to 49 per cent of economic output. When other forms of business debt are added in, including to partnerships and small businesses, that already extraordinary figure increases to $17tn.
    …

  10. Ok it obvious the Dems need the black vote and the ilegals vote to win. So the bribery of those groups have begun. Of course the Dems want to add convicted felons and 16 year olds to eligible voters. This in itself should tell you that their power grab is corrupt. It really has nothing to do with Citizens, especially the private sector working class .

    The Globalist also want a minority working class that the Government supplements so they can loot more of the gravy.

    Had the USA continued on the policies prior to the policies of a Global economy we would of solved poverty in the USA by now.instead the corrupt Welfare State and Government interference in Commerce has corrupted capitalism and everything is rigged.
    We have brainwashed Commie btat kid’s becoming the useful mob for the tear down of America.

    Of course these power factions can’t be United with more traditional USA Citizens because one threatens the others very survival under a Constitutional Republic.

    Also these nuts are pushing for reverse discrimation again the white race, and all forms of unlawful punishment to Whites for a fake narrative of White Privilege. This is no different than Hilter blaming the Jews.

    These Commies are encouraging bizarre punishment of the White race for historical crimes that all races have done in their history. Western Civilization and capitalism is being held up as a great evil to be replaced by Commie all people are equal ants, where Government insures exact equal outcomes.

    Commies are basically silly people who ignore the realty that Communist theory results in unproductive drones. It kills the human spirit and this is what people who have lived under Commie govs attest to. It makes people operate at their least. No motive to excel as you wait for big Gov to tell you what you get.

    1. Commies are basically silly people who ignore the realty that Communist theory results in unproductive drones.

      Feeling important in a bad system feels a lot better than being useless in an efficient system.

    2. Ok it obvious the Dems need the black vote and the ilegals vote to win. So the bribery of those groups have begun.

      But they need the white vote more, and their war on whites will do nothing but guarantee a Trump victory. Trump by a landslide.

    3. “Had the USA continued on the policies prior to the policies of a Global economy we would of solved poverty in the USA by now.”

      With RE prices being pumped higher in all of the Western economies the poverty stricken can no longer afford basic shelter. Today in the USA, a full time laborer is likely renting a room in a shared house…no longer able to afford a studio apartment. When a full-time job fails to provide for the basics that economy is headed for trouble.

      1. When a full-time job fails to provide for the basics that economy is headed for trouble.

        We are headed for trouble. But if we would just discourage instead of encouraging speculation in housing most of that problem would solve itself. But that means giving up on the wealth effect from the rising prices…which is the rope we’re dangling from over the abyss.

        1. But if we would just discourage instead of encouraging speculation in housing most of that problem would solve itself. But that means giving up on the wealth effect from the rising prices…which is the rope we’re dangling from over the abyss.

          It’s an absolutely piss poor way to manage the economy over the past 25 years. Just despicable. The FED should be run out of town on a rail for what they’ve done. Instead they’re clinking glasses at Jackson Hole and Davos.

          1. Having finally gotten around to reading Shock Doctrine, I think it’s even more than just the Fed, although their owners may be at the root of all of it. It’s foreign policy, military entanglements, everything. The entire world has been enslaved except a few holdouts and they are being worked as we speak. The owners are a tiny percentage of the population. Now that the fence is up and electrified around the whole planet, it’s just a matter of bringing the dangerous animals under control or eliminating them. Nobody is outside the fence now.

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