Apartment rents are collapsing

CoreLogic has released new rental data showing that apartments rents have collapsed by 4.2% in the six months to September, driven by massive falls of 5.0% across Sydney and 5.5% across Melbourne:

The performance of the rental market has diverged substantially between house and unit rents. Between the end of March and September, national house rents have risen by 0.4% while unit rents are down 3.3%. Every capital city has seen house rents hold up better than units rents, however, the biggest difference between the two property types can be seen in Sydney and Melbourne where unit rents are down 5.0% and 5.5% respectively while house rents have fallen by a much smaller 1.3% and 1.0%.

According to Mr Lawless, the significant difference in rental performance is a combination of supply and demand side factors. “Investment grade apartment markets have seen significant supply additions over the past decade, with a large portion of new apartments built in Sydney and Melbourne. The supply side has been further impacted by short term rentals transitioning to long term rentals. While supply has surged, COVID-19 brought about a significant demand shock from international and state border closures. Overseas migrants comprised a material component of tenant demand across inner Melbourne and Sydney, with many of these foreign students.”