Sydney and Melbourne apartment rents hammered

CoreLogic’s December housing market report, released yesterday, included the below interesting chart showing the monumental collapse in Melbourne and Sydney apartment rents following the COVID-19 induced collapse in immigration:

According to CoreLogic:

…weak demand and high supply has driven a sharp drop in rents. Demand for inner city unit rentals has been significantly impacted by stalled overseas migration, especially from lower overseas student numbers. Weak demand for inner city unit rentals has been exacerbated by a recent history of high rise apartment construction in Melbourne and Sydney, with the pipeline of new units that are still under construction remaining well above the decade average. Melbourne unit rents are down -7.6% over the calendar year and Sydney unit rents are down -5.7%. Weak rental conditions across the unit sector are likely to persist until overseas migration starts to ramp up and the higher levels of supply are absorbed.

The bulging rental supply in these two sub-markets is also illustrated by SQM Research’s rental listings data, which shows that there were 22,826 / 20,164 units listed for rent in Melbourne / Sydney as at 1 January 2021:

The outlook for apartment rents for these two cities remains poor. The National Housing Finance & Investment Corporation (NHFIC) last month forecast that Greater Melbourne’s and Greater Sydney’s housing markets would be thrown into structural oversupply as immigration collapses:

This is obviously great news for renters and a positive byproduct of low immigration.

Unconventional Economist
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Comments

  1. Sorry for my ignorance but why on earth would Darwin rents be increasing 9.6% for houses & 7.6% for units? What is happening in Darwin, anything? (I know it’s been a disaster for a few years so some of the increase is a “feel” good syndrome! Is this because Darwin is a fantastic economic growth zone?
    Seriously 9% rent increase is pretty big for a place in nowhere land unless there is some “amazing” Federal Government money being dropped into the place!
    Have I missed a memo or something?

  2. I suspect a large number of these apartment owners are investors with mortgage deferrals still paying strata fees. Be interesting to see how long they hold on to these properties as we move into 2021 and how patient the banks are.

    • happy valleyMEMBER

      The banks will be extremely patient as they know what Josh Rainbowberg “wants” and also bank retail depositors are propping up bank profits, having been shafted endlessly by the RBA and the banks on deposit rates and puppy dog APRA has gone to water and lifted restrictions on bank dividends and executive remuneration. Nothing to see here – move on.

  3. UNITED STATES RESIDENTIAL UPDATE …

    … COMPARE WITH AUSTRALIAN AND NEW ZEALAND ONES … AND WEEP … (… the ‘hammering’ is just starting Leith ! )

    Cities With the Highest Rent-to-Price Ratio … Roofstock

    https://learn.roofstock.com/blog/cities-highest-rent-to-price

    In recent years, home prices have been increasing faster than rents in the U.S., making homeownership less attractive. After dropping significantly during the housing crisis, home prices not only recovered but rose by nearly 70% from the lowest levels. However, despite rising home values, in some parts of the country, renting is still more expensive than owning when comparing monthly rents to monthly mortgage payments.

    According to data from the U.S. Census Bureau and the Department of Housing and Urban Development, the median monthly rent in the U.S. is $1,369, while the monthly mortgage payment on a median-price home at current interest rates is less than $900. … read more via hyperlink above …

    • REMOTE WORKING… ANYWHERE …

      “We’ll see work going to people rather than people going to work,” (refer … India Economic Times article below)

      … WHERE IS IT MORE COST – EFFECTIVE … AND THEREFORE WHO WILL SURVIVE ? …

      … AS POORLY GOVERNED HIGH – COST LOCATIONS ARE SEVERELY PUNISHED … AND FAST …

      The Work-From-Home Boom Is Here to Stay. Get Ready for Pay Cuts … Noah Buhayar … Bloomberg
      h/t Tory Gattis http://houstonstrategies.blogspot.com/

      https://www.bloomberg.com/news/features/2020-12-17/work-from-home-tech-companies-cut-pay-of-workers-moving-out-of-big-cities

      White-collar workers are taking advantage of a newfound flexibility to leave expensive coastal cities, even as companies move to “localize” their pay. … read more via hyperlink above …
      .
      .
      INDIA … WORKING FROM HOME … MASSIVELY BOOSTING EMPLOYMENT OPPORTNITIES FOR WOMEN …

      … “We’ll see work going to people rather than people going to work,”

      Work from home revolution is a surprise boon for India’s women … Saritha Rai … Bloomberg / The Economic Times

      https://economictimes.indiatimes.com/jobs/work-from-home-revolution-is-a-surprise-boon-for-indias-women/articleshow/79401373.cms

      The coronavirus pandemic has hit women worldwide with job losses and closures of childcare centers. Yet a surprising bright spot is emerging: India’s $200 billion technology services industry, where new rules are expected to provide female workers with a broad swath of flexible work arrangements and fresh employment opportunities.
      On the outskirts of New Delhi, Teena Likhari, 45, quit her job running operations for the Indian back office of a Silicon Valley company in 2018 because of a family medical emergency. Looking to rejoin this year, she expected a market stunted by lockdowns. Instead, the pandemic had made work-from-home mainstream in her industry, which had long shunned the practice.

      Not only did the operations manager quickly land a job with Indian outsourcer WNS Global Services, but working from her home in the city of Gurgaon, she began overseeing a 100-member team in the city of Pune about 900 miles away.

      … “We’ll see work going to people rather than people going to work,” said Keshav Murugesh, group chief executive officer of WNS which employs 43,000 workers globally, nearly 30,000 of them in India. “With flexible hours or selected work days, over 100 million Indian women with secondary degrees, could potentially find employment,” he said. … read more via hyperlink above …

  4. Donald Rumsfeld

    3 Bedroom houses in Alphington / Fairfield / Ivanhoe in Melbourne – some of the most expensive areas in inner Melbourne – have gone from $800 down to $500 – one bedroom flats are $350 while a 2 bedroom is $490

    Apartment owners are in real trouble I think.

  5. Holiday In ScomodiaMEMBER

    I know alot of hipster folk who fled Sydney over the last 5 years or so to live in Northcote type places in Melbs- many worked in cafe/bar/food scene (hammered), arts and creatives scene (hammered), seeing a few of them having recently moved back with folks in Sydney- multiply by a few thousand that would make a good dent in rental market…

  6. ashentegraMEMBER

    Ariel dogboxes with built in BBQ feature in oversupply.

    The rent falls mean little landlords enjoy larger tax deductions. As surveys show widespread structural flaws in high-rise buildings, holders have abundant opportunities to value-add simply by writing cheques.

  7. alwaysanonMEMBER

    In October we settled on our first house and moved out of a rented high rise apartment in inner-west Sydney. We had been paying $680/week and they listed it at $650 and after no takers dropped it to $600 to get someone. and this is high-end indoor&outdoor pool, ducted aircon, Miele appliance larger than usual etc – so if it has to take a 12% hit I am sure it is worse elsewhere…

  8. INTEREST CO NZ COMMENTS ON AUSSIE HOUSING THIS MORNING …

    World factories ended 2020 expanding; China focuses on food security – again; Aussie house prices up, except for high-density housing; UST 10yr at 0.91%; oil down and gold jumps; NZ$1 = 71.7 USc; TWI-5 = 73 … Interest Co NZ

    https://www.interest.co.nz/news/108536/world-factories-ended-2020-expanding-china-focuses-food-security-again-aussie-house

    … extract …

    … In Australia, their housing market finished the year on a strong footing with CoreLogic’s national home value index rising a further 1.0% in December; the third consecutive month-on month rise following a -2.1% drop in dwelling values between April and September. Australian home values finished the year 3% higher with regional housing values rising by almost 7%, a rate of capital gain that was more than three times higher than the combined capitals, where home values were up only 2% over the year. CoreLogic makes the point higher density housing has generally underperformed throughout 2020, and even in the late upswing. But that is not stopping some ‘experts’ saying 2021 overall rises in housing prices could top 10%.

    And hundreds of thousands of Australians face a pay cut of up to $100 per week from today as the employee wage subsidy JobKeeper is wound back.

  9. COVID DEATH RATES AND URBAN DENSITY … US, UK AND JAPAN …

    2020 YEAR END SUMMARY: URBAN DENSITY AND COVID DEATH RATES … WENDELL COX … NEW GEOGRAPHY

    https://www.newgeography.com/content/006901-2020-year-end-summary-urban-density-and-covid-death-rates

    The latest death rates from COVID-19 are displayed by county urban density in Figure 1. Death rates remain at or below the national death rate in counties with urban densities of 5,000 per square mile or below (Figure 2). These counties have low to medium urban population densities characteristic of suburban and exurban areas and account for 85% of the nation’s population (279 million out of a total population of 328 million). All categories of counties with urban densities exceeding 5,000 per square mile have more than their population proportionate share of COVID-19 deaths. Counties without urbanization (fully rural counties) also have higher proportional death rates (Figure 3). … read more via hyperlink above …
    .
    .
    CALIFORNIA LOSES 70,000 RESIDENTS 2019 TO 2020 … WENDELL COX … NEW GEOGRAPHY

    https://www.newgeography.com/content/006891-california-loses-70000-residents-2019-2020

  10. How do Core logic know what rent prices are being paid. How would they get their hands on that data? or are they just using “asking prices”? This data doesn’t correlate very well with SQM asking prices for rent.

    • Donald Rumsfeld

      Lols – the post yesterday about CoreLogic housing supply was torn apart in about one second as the most ludicrous data ever presented to the sentient human species – it was just ridiculous on a massive scale.

      CoreLogic is utterly embarrassing as a metric – only purpose it serves is to publicly discredit the person relying on it as a blatant liar.

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