- The latest data from Domain shows apartment rents dropped 3.2% over the June quarter, their largest fall in 15 years.
- Melbourne, Sydney and Hobart led the plunge as shut borders hurt their tourism and international student markets and increased the number of long-term rentals.
- House tenants in Melbourne and Hobart also saw substantial falls alongside those in Canberra, Brisbane, and Perth.
COVID-19 may not have smashed house prices as forecast, but it has managed to hit leased apartments for six.
Right across the country, the average apartment rent fell by 3.2% over the three months to June, according to the latest figures from Domain.
“The rental market has become highly fragmented in recent months. With weaker conditions for units compared to houses, tenants have a better chance of nabbing a cheaper unit,” Domain senior research analyst Nicola Powell said.
The fall knocks the equivalent of $15 off the rent of the average apartment dweller, although that amount fluctuates wildly depending on their postcode.
While the research shows “no city was immune from the impact of coronavirus”, some capitals saw greater falls than others.
“This weakness has been led by significant rent reductions in Sydney and Melbourne inner-city areas due to a surge in advertised rentals from March to June,” Powell said.
The drop was a predictable one, as Airbnbs and other short-term rentals, unable to attract visitors, flooded the market with stock. The increased supply of units in inner-city areas coupled with the sudden absence of international students and tourists, as well as even interstate visitors, meant rents in some areas could only go down.
In Sydney and Melbourne units fell 3.8% and 3.5% apiece, while Hobart plunged a stunning 8.4% over the quarter.
It’s no surprise those three led the falls. All three have shared in a booming tourism market, while the larger two have long enjoyed the upside of strong migration and a steady influx of international students. All three markets have effectively dried up as borders shut and learning goes online.
While closed borders may have slashed rents, the Prime Minister has warnedstalled migration will also undercut Australia’s economic recovery as the country struggles through its first recession in nearly thirty years. The rent relief might be welcome by impacted Australians, but it’s also tied up in the very reason some may be out of work for a long time to come.
“Tenants now have the novelty of choice. The rapid rise in advertised rentals has put pressure on rents. Tenants are using this as bargaining power to negotiate a deal while landlords compete to lure them,” Powell said.
Advertised rentals jumped by 43% in Sydney city and its eastern suburbs, and 63% in Melbourne’s inner suburbs, according to Domain.
The unit market in Perth, Adelaide and Darwin meanwhile didn’t budge one iota. Adelaide’s market, for example, remains at a record high – and almost 5% higher than last year – although is still vastly more affordable than its bigger east coast peers. That could, in turn, spur an internal migration of its own.
“Adelaide offers greater value for money compared to other capital cities. As we resurface from the coronavirus lockdown, it could become a drawcard destination for those seeking affordability,” Powell said.
While the inner-city exodus pulled the rug out from the unit apartment, houses were hardly inoculated either.
Again Melbourne and Hobart helped lead the charge lower. House rents there dropped 2.3% and 4.3% respectively. They were followed down by Brisbane (2.4%), Perth (1.3%), and Canberra (0.9%).
Despite softening rents over the quarter, however, many tenants will be paying more than they were last year.
Those in houses are paying 0.5% more nationwide than this time last year, and as much as 4.5% more in Canberra. For units, Adelaide and Perth residents have copped a 4.9% and 3.2% rise, albeit off a lower base.