Melbourne and Sydney apartment rents fall 2% during COVID-19

Photo by Gareth Harrison on Unsplash

Asking rents for apartments in the country's two biggest cities have fallen by 2% during COVID-19, new data shows.

CoreLogic's Quarterly Rental Review for June 2020 showed national rents dropped 0.5% in the June quarter, marking the largest quarterly fall in rents since September 2018, with further falls expected in the coming months.

Capital city rents have borne the brunt of of the COVID-19 pandemic's toll on the property market, dropping by 0.7% over the June quarter, compared with a 0.2% rise in regional parts of Australia.

But the biggest asking rent falls were in Hobart which plunged by 2.3%, followed by Sydney (1.3%) and Melbourne (1.0%). 

Asking rents for apartments fared the worst, with rents in Hobart dropping by 3.7%, while Sydney and Melbourne saw falls of 2.1% and 2.0% respectively. 

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Asking rents in Brisbane fell by 0.6% in the June quarter, eroding the increase of 0.6% in the March quarter.

Adelaide and Perth were the only capital cities to see an increase in rents over the June quarter.

Source: Corelogic

CoreLogic's Head of Research Eliza Owen said rents were beginning to rise nationally before the COVID pandemic.

“Prior to the fall in rent values over the June quarter, growth in rents had seen some momentum building, with the national CoreLogic rental index recording consecutive increases between September 2019 and March 2020," Ms Owen said.

"These signs of rebounding rent values came as investor participation in the market was falling from 2017, and subsequently, the rate of new supply additions in rental properties had been falling."

Change in rents:

Region	Median rent	Quarterly change in rents
Sydney	$568	-1.3%
Melbourne	$453	-1.0%
Brisbane	$439	-0.6%
Adelaide	$397	0.1%
Perth	$396	0.9%
Hobart	$454	-2.3%
Darwin	$442	-0.1%
Canberra	$566	-0.4%
Combined capitals	$466	-0.7%
Combined regionals	$390	0.2%
National	$441	-0.5%

But the economic impacts of the COVID-19 pandemic has led to significant rent falls in some parts of the country.

"Closed international borders created a significant shock to rental demand, as historically the majority of new migrants to Australia have been renters," Ms Owen said.

"Furthermore, job losses in sectors such as hospitality, tourism and the arts, which ABS payroll data estimates has been around 20%, have also impacted demand, because households in these sectors are more likely to rent than in other industries."

It comes after research from buyer's agency Propertyology found that house rents are predicted to rise in some parts of the country amid undersupply.

At the time, Propertyology Head of Research, Simon Pressley said sharp rent rises would be inevitable.

“Right now, 39 out of 52 Australian towns (75% of the country) currently have an undersupply, nine locations have a balanced market, and the remaining four are oversupplied,” Mr Pressley said.

"As local demand continues to rise, the pressure continues to push rents (and yields) higher.”

See also: Now that it’s a renters market, should you take advantage and find a new rental?

But rents in Melbourne and Sydney are expected to remain under pressure, with high vacancy rates of 3% and 3.8% respectively.

Data from ANZ and Corelogic released last week showed asking rents had plummeted by over 7% in some inner Melbourne and Sydney suburbs since COVID-19 hit.

The number of advertised rental properties skyrocketed by 57% in parts of inner Melbourne, while Sydney's inner city areas saw a 53% spike in rental listings.

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Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

• The big four banks are: ANZ, CBA, NAB and Westpac
• The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
• The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
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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.

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*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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