Author: Nila Sweeney of AFR
The AFR has reported asking rents for Melbourne CBD apartments have dropped by as much as 32.7 per cent since the onset of COVID-19 last year – the sharpest decline across the country – but the sector is poised for a strong recovery as tenants return to the city and the international border reopens, analysis by Domain shows.
Since March last year, rents have fallen by 31 per cent in Docklands, by 28.6 per cent in Southbank and by 28.3 per cent in inner-city Carlton, as the lockdowns prompted tenants to seek out larger homes outside the city and the lack of students drained demand.
Rental rates for Sydney CBD apartments have plummeted by 20 per cent since March last year, tumbling by 21.2 per cent in Haymarket and by 23.1 per cent in Chippendale.
However, the tide may have turned already for the Melbourne and Sydney apartment sectors, with rents rising by 3.2 per cent and 1.4 per cent respectively during the three months ending September – the first quarterly growth in more than a year, said Domain chief of research and economics Nicola Powell.
Rental rates for Melbourne apartments had also risen faster than houses which were flat during the same period.
“This is significant because with unit rents now rising faster than houses, it signals that the worst has passed for landlords,” said Dr Powell.
“We’re seeing renters in cities such as Sydney, Melbourne, Canberra and Brisbane start to consider apartment living as an option, shown by the unit rent increase, largely being driven by affordability, whether that’s people seeking a better deal or cities that have record high house rents become a strain on budgets.”
Dr Powell said as Victoria and NSW reopened, and with international travel on the horizon for residents, rents were expected to continue to rise over the next 12 months in most states.
“I think we’ll probably see the strongest rates in rental growth in those inner-city areas which have seen large declines in rents since COVID-19, and now they have started to recover,” she said.
“I would expect the overseas migration or international visitation will put greater demand on inner-city rentals, which will help sustain recovery.”
Overall, space and lifestyle remained an important factor for tenants who may have a family or needed to share a house, Dr Powell said.
“In some cities, it’s clear that tenants are willing to pay a premium for space necessary for their lifestyle,” she said.
Asking rents for houses in coastal suburbs such as Broulee on NSW’s South Coast have surged by up to 52 per cent since the start of the pandemic and by 44.3 per cent in Crescent Head on the north coast.
Rents for houses in Barwon Heads on the Bellarine Peninsula rose by 35.6 per cent, and lifted by 34.7 per cent in Coolangatta on the Gold Coast and 34.6 per cent in Coolum Beach on the Sunshine Coast.
In Sydney, asking rents for houses in Collaroy on the northern beaches rose by 36.4 per cent and by 33.8 per cent in Bronte in the eastern suburbs.
Dr Powell said as the lockdowns ended and the border reopened, demand for regional rental homes may start to slow.
“I do think that could happen, particularly when you’re talking about the rental market where it’s more transient than buying a property,” she said.
“I think there will be some people who have made this move temporarily to a lifestyle location, perhaps to test and try to see if they want to be there full-time.
“But as workers return to the office, even if we move into this hybrid way of working, people may decide to move back to the cities or within a reasonable commute from work.”
The shortage of supply has also bolstered large jumps in rental increases in mining towns across WA and Queensland.
Asking rents for units in New Auckland in the Gladstone region have soared by 50 per cent, jumped by 49.5 per cent in South Hedland in WA and by 43.7 per cent in Port Hedland.
Credits to Author: Nila Sweeney of AFR