Rents plummet in Sydney and Melbourne amid record oversupply of properties

author-avatar By on July 20, 2020
Rents plummet in Sydney and Melbourne amid record oversupply of properties

Photo by Danny Howe on Unsplash

An oversupply of properties is making it cheaper to rent in Australia's biggest capital cities.

The latest ANZ CoreLogic Housing Affordability report found advertised rental properties increased by 57% in inner Melbourne, while Sydney's city and inner-south both recorded a 53% jump. 

Loss of income and travel restrictions contributed to the excess stock levels, causing a sharp decline in asking rents. 

However, the oversupply was confined to Sydney and Melbourne, with all other capital cities seeing a drop in total rental listings. 

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.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

ANZ economist Felicity Emmett said the fall in demand for rental properties in these areas was due to their 'service economies', as people working in industries hardest hit by COVID-19 were also most likely to rent. 

“Nearly 40% of people who work in the accommodation and food services sectors rent,” Ms Emmett said.

“Between the weeks ending 14 March and 27 June, 21% of hospitality workers lost their jobs, compared to an average of 6% across all industries.”

The report found rental demand in these areas would have dropped even further if not for JobKeeper and JobSeeker. 

Although job losses had been more severe across the 'service economies', these sectors had a better recovery than total combined sectors over May and June, signalling some stabilising demand in the rental market.

anzhsaff20 

The oversupply of inner-city stock pushed rental values down as much as 7% in Sydney suburbs Haymarket and Bangaroo as well as Southbank in Melbourne. 

CoreLogic's Head of Research Eliza Owen said while reduced competition for rental properties is beneficial for tenants looking to negotiate rent reductions, landlords shouldn't panic. 

“The oversupply of rental stock since March has been largely confined to inner-city areas in Melbourne and Sydney, while all other capital cities have experienced a decline,” Ms Owen said.

“There are still opportunities for investors where rental markets have continued to tighten and rental values have increased, including select suburbs across Perth and Hobart where Airbnb stock may be reverted back to the short term rental market as inter-state travel resumes.”

Unit rental prices see massive drop 

Analysis by Domain found the rental market has become highly fragmented in recent months. 

Weaker conditions for units compared to houses meant unit rentals experienced their biggest price drop in more than 15 years, however the performance depended upon the number of bedrooms. 

Domain Senior Research Analyst, Dr Nicola Powell, said the damage to the rental market from the pandemic was being felt nationwide. 

"Rental prices fell across most major capitals, illustrating no city was immune from the impact of the coronavirus pandemic, with Sydney and Hobart units recording the steepest quarterly fall on record," Dr Powell said.

"Asking rents for one-bedroom units in Sydney and Melbourne experienced the most significant falls over the June quarter, followed by two-bedrooms.

"Three and four-bedroom units in Sydney and Melbourne remained relatively stable, or grew for three-bedroom units in Melbourne."

Units, quarterly change in asking rents 

1 bed 2 bed 3 bed 4 bed
Sydney -6.1% -1.9% -0.7% 0%
Melbourne -5.3% -2.2% 4.0% 0%
Brisbane 1.5% 1.3% 0% -1.2%
Perth 0% 0% 0% -4.4%
Adelaide 3.4% 1.6% 0%
Canberra -1.2% -2.0% 0% -0.8%
Darwin 1.9% 0% -2.2%
Hobart -10.3% -7.1% -7.1%

Source: Domain

Dr Powell said Hobart units experienced significant falls across all apartment sizes, highlighting the huge rental disruption. 

"Given a large part of Hobart’s economy is driven by tourism, many landlords had been lured by the lucrative incomes of short-term holiday lets.

"The pandemic has been detrimental for the tourism industry, and landlords were quick to seek longer-term tenants in order to retain cash flow during this time."


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 2019. They are (in descending order): Credit Union Australia, 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.

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*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.

Latest Articles

author-avatar
Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

Get free insights & tips monthly

By subscribing you agree to the Savings Privacy Policy

Loading data please wait...

{{returnData.productName}}

Overview

Current Rate

{{returnData.currentRate | percentage:2}}

Comparison Rate*

{{returnData.comparisonRate | percentage:2}}

Rate Type

{{returnData.rateType}}

Advertised Rate

{{returnData.advertisedInterestRate}}

Comparison Rate*

{{returnData.comparisonRate}}

Monthly Repayment

{{returnData.monthlyRepayment}}

Interest Type

{{returnData.interestType}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Bonus Interest Rate

{{returnData.bonusInterestRate | percentage:2}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Introductory Rate

{{returnData.introductoryRate | percentage:2}}

Introductory Term

{{returnData.introductoryTerm}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Term

{{returnData.term}}

Advertised Interest Rate

{{returnData.advertisedInterestRate | percentage:2}}

Interest Frequency

{{returnData.interestFrequency}}


Fees and Features

Ongoing Annualised Fee

{{returnData.annualFee}}

Upfront Fee

{{returnData.upfrontFee}}

Offset Account

Redraw

Principal & Interest

Interest Only

N/A{{returnData.interestOnly}}

Max loan to value ratio (LVR)

{{returnData.maxLVR | percentage:0}}

Lump sum repayments

N/A

Additional repayments

Maximum Loan Term

{{returnData.maximumLoanTerm}}

Upfront Fee

${{returnData.upfrontFee}}

Ongoing Monthly Fee

{{returnData.ongoingFees}}

Early Repayment Fee Applies

N/A

Vehicle Types

{{returnData.vehicleType}}

Maximum Vehicle Age

{{returnData.maximumVehicleAge}}

Pre Approval Available

N/A

Online Application

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Minimum Deposit

{{returnData.minDeposit | currency : '$' : 0}}

Upfront Fees

{{returnData.upfrontFee | currency : '$' : 0}}

Annual Fees

{{returnData.annualFee | currency : '$' : 0}}

Notice Period to Withdraw

{{returnData.noticePeriodToWithdraw}}

Online Application

N/A

Automatic Rollover

N/A

Maturity Alert

N/A