Australia’s unit rental market has suffered its biggest price drop in more than 15-years due to the COVID-19 pandemic.
A Domain Report revealed the price for renting a unit plunged 3.2%, to just under $450 a week in the June quarter:
Rental houses fared better, falling 1.2% to an average of $446 a week:
Inner-city markets have been hardest hit, with Sydney and Melbourne seeing the biggest fall in prices, according to Domain:
For the past two years Sydney unit rents have tumbled annually as tenants benefited from heightened investor activity in previous years, as completed off-the-plan apartments add to supply. The pace of decline has now gathered additional momentum. The depth of the fall over the quarter and year is the sharpest in more than 15 years. Unit rents have now fallen 9.1 per cent from the 2017 peak, pushing them back to the lowest in half a decade. The city and eastern suburbs, inner west and lower north shore have felt the brunt. Deteriorating unit rents have forced Sydney’s gross yields to a record low of 3.66 per cent…
[Melbourne] unit rents recorded the first annual fall in 15 years. The drop in unit rents have pushed gross rental yields to a near-record low.”
“Inner Melbourne felt the brunt of price declines over the June quarter, median house asking rents dropped a staggering $40 and units $35 a week. Vacancies have surged in inner Melbourne, with advertised rentals lifting 64 per cent from March to June. This has created a discounting war, forcing one-third of inner Melbourne landlords to slash asking rents in an attempt to secure a tenant.
Many short-term leases have converted to long-term, increasing rental choice. With significant job losses and wage cuts, tenants may have relinquished higher-priced rentals in favour of affordability or to move in with family. Though international border closures have weakened demand, Melbourne is particularly exposed to a drop in overseas migration, student population and tourism, as a significant proportion of rental demand comes from overseas. This is particularly evident in the CBD…
Rents will likely continue falling due to:
- High unemployment and falling household incomes;
- Falling immigration; and
- Rising rental supply from the flood of dwelling completions and the return of Airbnb’s to the long-term rental market.
Given that dwelling values are also likely to fall, property investors are facing a rough period ahead.
