Coronavirus could see rent prices drop by 10%

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on April 09, 2020
Coronavirus could see rent prices drop by 10%

Photo by Mitchell Luo on Unsplash

A surge in vacancy rates sparked by the coronavirus pandemic could see rents drop by as much as 10%.

The latest quarterly Domain March 2020 Rent Report showed rents had been rising in Sydney, Melbourne, Adelaide, Perth, Canberra and Hobart in the first three months of the year.

But the rise in median rent prices across most major capital cities in the first half of 2020 could be short-lived as rental listings flood the market due to COVID-19.

With many renters rushing to lower their living costs amid the pandemic, listing volumes for rental properties have soared over the last two weeks of March, which is expected to bring down rent prices.

Capital city MAR-20 median rent QoQ growth YoY growth
Sydney $530 1.00% -1.90%
Melbourne $440 2.30% 0.00%
Brisbane $410 0.00% 0.00%
Adelaide $395 1.30% 1.30%
Perth $375 1.40% 2.70%
Canberra $580 0.00% 1.80%
Darwin $480 -3.00% -4.00%
Hobart $470 2.20% 4.40%
National $451 1.20% 0.20%

Source: Domain 

"Most states and territories have seen a lift in rental listings over the second half of March as the coronavirus pandemic impacts short-term rentals and tenant hip pockets due to income reduction or loss of employment," Domain senior research analyst Dr Nicola Powell said.

"Tourism has also plummeted due to social distancing rules and travel restrictions, short-term rental cancellations may mean landlords have to rethink their investment strategy, forcing many to the longer-term rental market."

That, combined with a complete shutdown of our borders means that rent prices could fall by as much as 10% nationally, depending on how long shutdown measures are in place and the wider impact on the economy and house prices.

Some economists are predicting house prices could plummet by up to 30% in Sydney and Melbourne as a result of the fallout from the pandemic. 

SQM Research meanwhile estimated that rental vacancy rates could exceed 3%, dropping rent prices and putting off many would-be property investors.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (Special) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 24, 2022. View disclaimer.

          Sydney

          Before the pandemic, Sydney rents were on a high: House rents had risen for the first time in three years while unit rents rose for the first time in two years.

          The old supply and demand equation helped, with a drop in investment activity and construction combining with steady population growth helped to tighten the rental market.

          But Ms Powell said that a return of short-term holiday rentals to the longer-term rental market and tenants facing financial uncertainty will change that.

          "Some landlords have moved property from short-term holiday leases to the long-term rental market during the coronavirus pandemic," she said.

          "Some tenants may also opt to reside with family while our lives are impacted by social distancing, job security fears and economic uncertainty. Rental supply is likely to increase further in the coming months, putting tenants in the driver’s seat."

          Melbourne

          Melbourne rents climbed by 2.3% in the first three months of 2020: Unit rents reached a new high of $430 per week while house rents climbed to $440 a week.

          "During this time the influx of new residents from overseas and interstate has placed additional demand on the rental market, which has led to heightened competition for rental accommodation. The outlook looks set to change," Ms Powell said.

          "A lift in rental listings over the second half of March could help to provide rent relief for some tenants as the coronavirus pandemic forces many overseas tenants to leave, vacating rental accommodation unexpectedly.

          "Meanwhile others vacate rentals as people opt to move in with relatives as they look to lower the cost of living amidst an unstable employment outlook."

          Brisbane

          The stability of Brisbane's rental market looks to be in strife, with prices expected to dip as foreign residents return home and tenants facing job insecurity cut their losses and move out. 

          The city's rent prices had remained at a steady $410 for houses and $385 for units for the past year.

          According to the report, tenants have had the longest period of stability in Brisbane with just over five years of steady rent prices.

          "However, Brisbane’s vacancy rate has been sliding marginally over the past few years indicating that the extended period of heightened rental supply is tightening," Ms Powell said.

          "Under normal circumstances the trend suggests tenants would eventually experience greater competition to secure leases. However, the economic impact of the bushfires and the coronavirus pandemic will be felt across Queensland and particularly the tourism regions.

          "Travel restrictions, border closures and social distancing rules have meant tourism is virtually non-existent. This has forced many short-term rental properties to the longer-term rental market in a bid to keep investment cashflow for landlords."


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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          author-avatar
          Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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