Australian property rents suffer biggest ever fall

The data continues to deteriorate for Australia’s army of negatively geared landlords, with the Australian Bureau of Statistics (ABS) reporting that capital city property rents declined by a record 1.3% over the June quarter and by 1.2% over the year:

Looking across the capital cities, you can see that rents were universally weak:

Most notably, rents fell by 2.0% in Sydney and 1.1% in Melbourne over the June quarter. Given immigration has collapsed and both cities still have an avalanche of supply in the pipeline (see next chart), rents should continue to fall:

When viewed alongside falling dwelling prices in these two cities:

Leveraged property investors are facing a precarious future.

Leith van Onselen

Comments

  1. Burn baby!

    The roof, the roof, the roof is on fire
    The roof, the roof, the roof is on fire
    We don’t need no water, let the motherfvkn burn
    Burn motherfvkcn, burn

  2. not where i live, first time since ive been living in this dump apartment for 5 years theyve announced a rent hike, 150 to 160 p/w in september. i dont even know why.

    anything over $200 a week in rent for me seems grotesque, no way would i pay what people pay to live in some dogsh1t brunswick or newtown slum with no plastered walls, at least my prison looking apartment is adequately priced.

    • There was something on the news today that said former fifo workers from out of state who now reside here, because of covid and returning “australians” from overseas have pushed rents up in WA. But this is all anecdotal. I dont know what publsihed stat you could use for a real picture of the current situation.

      • Diogenes the CynicMEMBER

        Yeah 5000 FIFO families from the eastern states moved to Perth to avoid all the quarantine restrictions coming in. That was back in March/April and did have an effect on rental vacancies – I assume most of them rented houses or very large units if they had kids. My anecdota from Perth says rents are definitely down for city apartments but there is some buying appetite in the inner ring for nice family houses – they seem to sell quickly. Mostly professionals upgrading as if they are still getting $ from mining companies is my guess.

    • Max
      It’s not surprising, Perth has had a very strong “clean out” over last few years.
      Melb and Syd falling may have a positive effect on Perth initially.

      These falling rents are really the hidden disaster because if you have a good tenant as an investor you can ride out any price falls.

      There just seems so many negatives this time, rising unemployment and falling rents really forces sales

      In 2017, prices fell with no effect on unemployment and interest rates fell so owners with inv or landlords could ride it out

      They can’t this time they will be forced to sell

      I’d say there will be many resi investors that own commercial and commercial is an absolute disaster

      It seems like dominos falling this time

  3. The best source for this in the rental bond data. This data should indicate movement of rent as per signed leases, as opposed to asking. Available from nsw fair trading.

    • bond data would also be unable to capture rent reductions for ongoing tenants – I know quite a few of people who asked for and got significant rent reduction based on current market

  4. Leveraged property investors are facing a precarious future.

    and in Australia almost all of them are of this kind because having equity locked into PI is considered the be the waste of the worst kind so as soon there is some equity it usually gets used as down payment for another PI (after the sale or not)

    • There’s no point having your wealth “tied-up” inside a house.
      The way to “make your money work for you” is to harness that equity via a bank loan to “invest” in a tax-effective investment structure that has made more Australians rich than any other.

      • So, more than six months ago, the worst economic pandemic disaster ever happened in the world. Worse than the great depression, worse than the GFC! And we have a piddly rent drop of about a per cent and record RE prices being set. Has the penny dropped yet big Brento?

        • I’m still hoping for a return to affordable housing sometime in my lifetime. However I have yet to see any evidence of it happening in our major cities (or anywhere).

          • The future of Australia, as I’ve said here before, is a retirement destination for the wealthy citizens of the world.

            There will never be “affordable housing” in Australia in your lifetime. Just accept it and move on.

          • BrentonMEMBER

            lol when fundamentals breakdown (even those of a credit fueled bubble), it’s time to start with wishful thinking and fantasy.

            As usual, Les is thick with innuendo and light on data.

          • billygoatMEMBER

            I hope for same future as The Claw..affordable rent circa 1968:). I’ve succumbed to fantasy just not same as everyone else that lives in Covid ravaged nation with ever rising house prices. My fantasy is opposite…that said I agree with Les…another 3-6 of lock down, shut down, shut up, mask- skam wearing BS and dumb folk will feel safe from bat flu. The numbers presented on the TV ( horror movie right there on my TV shocking me right out of my brain) will go to zero & suicide rate in opposite direction. Problem solved, cheap housing on market, broke & broken locals, borders open…property to the moon & back. Rinse and repeat for 7 generations. Boom

        • BrentonMEMBER

          Even with the largest deficit spending in a century, we saw the largest rental falls in the history of the dataset.

          I’d say things are pretty clear for many at this point, perhaps even for most of the specufestor class; see investor credit (or lack thereof).

          I got to ask you, what new accommodation are you waiting for that the Government, Central Bank and regulators have not already drunkenly thrown at you? Smacks of anxiety and denial…. where have I seen those terms before?

          • I’ve gotta admit Brenton, I do admire your determination of your masturbatory hallucinations. As dumb and dim-witted it’s clearly been over all these years, you’ve stuck with it and you get a point for that.

          • BrentonMEMBER

            Of all the things to invest your money in over the last few years, Oz property has been the worst. It’s why investor credit growth peaked in early 2017 and has been falling ever since. It’s why foreign investors peaked at a similar time and have not been seen since.

            The smart money has exited or is exiting. Only the dumb money is left (I’d look into that, mate).

          • Brenton, you’re not taking into consideration leverage.

            Leverage means in straya you can buy an IP at 95% loan to deposit and a gain of 5% is 100% on your investment. Government guaranteed.

          • BrentonMEMBER

            My god, this is why Oz is farked.

            This is not leverage applied to a trade; ie you forfeit the premium on an options contract if it doesn’t go your way.

            You are on the hook for that debt backed leverage for the rest of your days should price action not go your way; ie when a housing bubble bursts on RoC in credit growth (rates @ 0%). Falling rents and falling real incomes means that absent capital gains you are effectively insolvent, hence the peak in IO at 50%, around the same time that prices also happened to peak.

          • Right. In straya, you are not on the hook. You just sit tight and wait for uncle government and RBA to save you and make sure your free lunch sandwich is freshly cut each year.

        • “So, more than six months ago, the worst economic pandemic disaster ever happened in the world. Worse than the great depression, worse than the GFC! And we have a piddly rent drop of about a per cent”

          Yeah that finished six months ago did it Les?

          Recession is just getting started.

  5. DominicMEMBER

    Nah, I’m sure ScoMo will trot out a new taxpayer funded scheme to make ‘investors’ whole again – and if they’ll get a ‘free’ white good of their choice from Harvey Norman.

    • No. Scomo’s scheme would send a $2000 cheque to Gerry Harvey, and after considerable paperwork involved, Gerry would ship a new fridge to the investor 30% smaller than the fridge they were using this time last year.

  6. tripsterMEMBER

    Areas with lots of apartments in particular are down way more than a few percent. I have lived in the same area about 15 mins south of the Sydney CBD for the past 8 years (originally renting, now own). It is a suburb largely filled with apartments. It has gone from having 20-30 rentals advertised at home time to now at least 140 rentals apartments advertised for rent.

    Rents have also fallen massively. When I rented here back in 2012 a one bedroom apartment was $450 – $500. One bedders are now renting for $500 max (for the really nice ones) again. That’s 8 years of rental growth gone. Two bedders were going for $800 – $850 – now back to $650 – $700.

      • billygoatMEMBER

        Yep @The Claw it is f**kety f**ked. Unless you have rich folks, sugar daddy or earn 180K plus PA.
        Imagine poor f**kers earning 50K or less or working for jobkill allowance ie ‘allow’ folk to just survive.

    • C.M.BurnsMEMBER

      i looked at WC when I was moving (lived there 10 years ago also), saw an insane number of apartments for rent. but having lived there when they were building a lot of those flammable dog boxes, I wouldn’t want to even risk renting there (and no way would I buy). Good odds the next apartment to fall apartment will be among those that went up in WC in record-fast time

  7. 1% is such BS. I was in a 1BR Apt last year, 485/wk. Moved down the road last month to a 2BR for 420. Old apartment has dropped rent 3x now also 420 and still no takers. (Richmond VIC)

  8. I have no sympathy for property investors (Er, speculators). They were playing a leveraged bet on housing that drove it to unaffordable levels and caused massive disruption to our economy, drove income and wealth inequality and massive inter generational transfers. As far as I’m concerned, they can “get stuffed”

    • BrentonMEMBER

      Plus 1

      Just look at the level of denial and sense of entitlement from the likes of Les.

      Prices literally peaked in 2017, 3 full years ago, and they’re talking about some government guaranteed future boom.

      Incomes – stagnant to falling
      Rents – falling
      Prices – falling
      Investor credit – falling
      Rates – @ ZIRP
      Immigration – falling
      Foreing buyers – falling
      Government stimulus – peaked and soon falling

      ….but, aaaah, “Australia is always going to be a retirement resort for people of the world” facepalm.jpg
      Zero sympathy for them.

      • Every time housing has stumbled over the past few years I still nurtured hope. This time however I think that investors, supported by the government and banks will probably wait it out. The gates will open again next year.

      • Brenton, you are telling lies again.

        *Incomes not falling. Actually, income has risen thanks to JS, JK.

        * Rents. Down 1% in aggregate since last year. That’s $6 per week on your average rental. Piss all.

        * Prices are not falling. The opposite is true.

        * Investor credit has been negative for years now. It’s irrelevant to prices. But you really don’t want to understand this. Hint: marginal buyers set prices.

        * Rates. Mortgage rates. Haven’t even got to 1% yet. Because they don’t need to. They can currently go to half a percent and the banks are still making a profit.. Thats years, if not decades of room to move. And the RBA hasn’t even gone to zero or negative, which it absolutely will if it’s required for RE prices but won’t even be needed with all the fiscal stimulus.

        * Immigration is not falling. It’s at the bottom. It’s only going to go up from here and you can guarantee yourself that it’ll be supercharged once the borders are opened in a few months. Don’t you know about that bloke SFM and his mates?

        * Foreign buyers. Not falling. The opposite is true and will be further incentivised once the border opens. As above re SFM and mates. It’s the no. 1 priority of the government.. do you really not understand this?

        * Government stimulus. Peaked? You’re having a laugh, right? 🤣 It’s bottomless. Hasn’t even begun.

        • BrentonMEMBER

          Incomes (wages & rents) are falling – banks dont count temporary stimulus checks for credit criteria, neither should you
          Rents – falling (you agreed)
          Prices – are falling (see Corelogic or any price data)
          Investor credit – drove the 2012- 2017 (peak) doubling, critical for exponential price action or lack thereof
          Rates – central bank rate is ZIRP; headline mortgage rates are selectively dolled out, which is why central bank rate is the blunt instrument that previously helped all Oz households.
          Immigration – falling (zero), remember facts before fiction. Hint: even were immigration to return, it would have to return to previous highs just to tread water.
          Foreign buyers – long since peaked, as ive pointed out to you in past with actual data.
          Government stimulus – yes, peaked, or did you miss the announced budget?

    • I can’t mount any disagreement. I’m only being exposed to the attitude of a landlord for the first time in 11 years and the entitlement is shocking.

      • billygoatMEMBER

        Well your landlord is putting a roof over your head cos you can’t:) His entitlement is earned by sheer hard work of borrowing against equity:)) what are you doing? /SARC

        • J3sus Chr$st thanks for the sarc tag the outer mantle of my head was showing cracks heading into a supernova.

          And not a champagne supernova, neiver.

  9. Those wanting affordable housing to happen are out numbered by specufestors and owner-occupiers who get a thrill or cash advance from rising house prices.

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