The property market has shown a surprising resilience over the past few weeks. Even though the restrictions imposed by the coronavirus outbreak have significantly affected the local economy, property sales have maintained their value and commanded buyers.
This has not only been our experience, it is also supported by recent reports from Core Logic and the Real Estate Institute.
The Core Logic April Home Value Index showed that the values of dwelling have been reasonably stable, with a fall of just 0.1% in April, and an overall rise of 0.5% over the last 3 months, and 5% over the last 12 months.
The Real Estate institute of Tasmania has reported a downturn in inspections and new listings, but that there remained a shortage of properties for sale, and therefore enabling prices to hold.
The experience in mainland markets has been less positive. According to Domain, discounts in Melbourne and in Sydney sale prices amounted to 4% during April, while discounting on live listings were now running at over 10%. In other words, discounting is increasing as sellers are feeling the pressure.
In one respect, one would expect the market to fall away, but the reality is that the market in Tasmania has remained stable. No doubt there are buyers looking for bargains, but that is the case in any market. This could be due in no small measure to the level of mortgage support being offered to homeowners. Those suffering financial hardship have been able to arrange payment deferrals with their financial institutions, thus alleviating the pressure to sell.
On the commercial side, it is obvious that many retail tenants, and particularly so in the hospitality sector, have been hit hard by the clampdown, and many have had to close their doors, at least for the time being.
It is obviously in the interest of both landlord and tenant that arrangements be made to ensure the tenant does not go under during this time, and many have entered into voluntary arrangements to ensure that is the case.
Governments have been concerned to ensure that tenants not be penalised by the restrictions imposed. Even though voluntary arrangements have been acknowledged, the Government has stated that no tenant should have their rent raised or be evicted during the close down period, and is introducing legislation to bring effect to this.
It is an easy thing to say – and the sentiment is applauded – but it is much harder to implement. Landlord tenant relationships are complex. Introducing legislation to codify arrangements between landlords and tenants is no small matter, when there are so many variables to take into account, and there will always be exceptions and the range of arrangements defy a quick-fix solution.
The recently passed state legislation COVID-19 DISEASE EMERGENCY (COMMERCIAL LEASES) ACT 2020 does provide a valuable framework for landlord and tenant negotiations. It largely will support the principles of the mandatory code of conduct issued by National Cabinet, however it has deviated in some respects, most notably the potential hardship period as 12 months compared to other states as 6.
The provisions particularly relate to the protection of tenants, but there is no acknowledgment that a relationship might need to be managed once the period of hardship is over, whenever that may be.
Obviously it will take time for a tenant to be able to get back to full operation, and it would be wrong for the legislation to be used as a rationale for a breakdown in any relationship at the other end of this process.
Furthermore, while the legislation concentrates on the tenant’s situation, little consideration has been given for the landlord, and many landlords will also be experiencing difficulty during this time.
There is an underlying assumption in the legislation that lessors are all powerful, while lessees are not, when this is not necessarily the case. Not every landowner owns a shopping mall, and not every lessee is a small single operator.
There is some confusion, or rather a lack of clarity, with respect to the responsibilities of body corporates under these circumstances, as well as the sharing of any benefits derived from government action. There are a number of other matters that also require consideration, and no doubt these will be tested during the implementation of the Bill through real life events.
Irrespective of the mandated conditions imposed, we would urge all parties to reach a suitable and mutually acceptable accommodation for this outbreak period. We are hopeful that restrictions can be lifted quickly, and let us hope we can get things back to normal as soon as possible.
At Devine Property, we are working with landlords and tenants to help steer a path that encourages a viable relationship can continue, as it is in the interests of all parties to ensure this is the case.
For us, there has also been a positive side, as the new operating regime has encouraged us to be more efficient, and in so doing being even better able to service our customer base.