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.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME 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%
LIMITED TIME 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%
VariableMore details
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
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
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

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

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

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

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 27, 2021. View disclaimer.

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.

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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 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.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

*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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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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