New research by Domain has found unit asking rents have seen the steepest annual fall nationally since 2004.
Domain’s Q3 2020 Rental Report has sparked concern for some unit owners, with prices in Australia’s two largest property markets — Sydney and Melbourne — dropping to some of the lowest points seen in recent times.
“Fragmented conditions in the rental market remain evident in the September quarter, with weaker unit rents compared to houses,” said Domain senior research analyst Dr Nicola Powell.
“This is particularly so in inner-city areas which are more susceptible to changes in overseas migration and international students, tourism and job losses associated with COVID-19.
“Nationally, house rents have regained all of last quarter’s fall. National unit asking rents dropped further over the September quarter. Prices are 4.2 per cent lower than March, equating to a $20 a week reduction. This is the deepest fall over two consecutive quarters and steepest annual fall since the start of Domain’s rent report in 2004.”
Domain’s research found unit asking rents dropped further over the September quarter, representing a 4.8 per cent decline since March, or $25 taken from the median weekly asking rent.
“This is the deepest fall over two consecutive quarters since the start of Domain’s rent report in 2004. Unit rents have now fallen $55 a week from peak prices in 2017 and are now the lowest in six years,” Dr Powell noted.
“Since March, house and unit asking rents in the city and east region have had the largest decline in Sydney — by $125 and $80 a week, respectively. This is followed by a $70 a week reduction to unit asking rents in the lower north shore. These are the only areas in Sydney to record double-digit percentage falls over this six-month period. Tenants are now paying the same price they were in 2013.”
The Victorian capital has seen the greatest decline in unit rents of all the capital cities — no doubt a result of the stage 4 lockdown. According to the research, unit asking rents dropped another $15 a week over the September quarter.
“Tenants will find asking rents are $30 a week lower than the March peak, before the pandemic. The median weekly asking rent now sits at $400 a week, the lowest in roughly three years. This is the first time Melbourne and Hobart unit rents are the same,” Dr Powell said.
“Units in Melbourne’s inner ring have had the biggest reduction in asking rents. Since pre-pandemic March, unit asking rents in the inner city, inner east and inner south slipped by $65, $35 and $30 a week, respectively. This marks the deepest fall over two consecutive quarters since the start of Domain’s rent report in 2004.”
Upwards towards the Sunshine State, house and unit rents are now at record highs, with a strong gain of $15 a week over the September quarter, Domain’s research found.
“House rents are now at $415 and unit rents $395 a week. Brisbane is the fourth most affordable capital city to rent a unit. Brisbane unit rents could overtake Melbourne in the coming months, as Melbourne unit rents tumble, pushing the rent price gap to $5 between the two cities — a four-year low,” Dr Powell added.
“Amid the pandemic, the estimated number of vacant rentals has returned to expected levels following a dramatic bounce in April. Brisbane’s vacancy rate is on par with pre-pandemic March, with the volume of empty rentals down marginally compared to this time last year. The reduction in available vacant rentals aligns to the easing of restrictions.”
The city of churches also saw a new record over the September quarter, with Domain noting Adelaide asking rents reached $405 a week for houses and $340 for units.
“Unit rents posted the strongest quarterly gain out of all capital cities, along with Perth. Affordability is becoming stretched — rental prices have recorded the highest annual growth since 2007 for units and 2010 for houses,” Dr Powell said.
“Adelaide’s vacancy rate is once again on par with pre-pandemic March, as the estimated number of vacant rentals declines following a strong April bounce. The reduction in empty properties aligns to the easing of COVID-19 restrictions, perhaps reflecting the conversion of rentals back to holiday lets as short-term demand increases.”
Moving across to Australia’s west coast, Domain found there has been a “stark turnaround” in Perth’s rental market over the September quarter, as asking rents surge and mark the strongest gains out of all capitals.
“House rents jumped $25 to $395 a week, the highest asking rent since early 2016. Units are back to mid-2016 asking rents, increasing by $20 to $340 a week,” Dr Powell said.
“This is the steepest quarterly gain since 2012 for houses and 2013 for units. This is a significant turnaround and unfamiliar territory for tenants who have been in the driving seat, following many years of falling rents.”
Hobart has seen stable house rents over the quarter and annually, “but remain $20 per week, or 4.3 per cent, below the record achieved in March”, Domain found.
“Hobart has had the largest fall in house rents of all the capitals since March. This has resulted in gross rental yields deteriorating from the highest yielding capital city to the fourth highest,” Dr Powell said.
“Following a steep decline last quarter, unit asking rents have regained half of the loss over the September quarter. Unit rents are $20 a week lower than the March price peak. This 4.8 per cent drop makes it the second hardest hit unit rental market over the past six months, along with Sydney but behind Melbourne. Unit rents are now $400 a week.
“This is the first time Melbourne and Hobart unit rents are the same price since the start of Domain’s rent report in 2004.”
Australia’s capital has seen house and unit rents regain all of the fall from the previous quarter over this one, with asking rents back at pre-pandemic highs.
“Canberra remains Australia’s most expensive city to rent a house, at $580 a week, and second most expensive to rent a unit, at $480, behind Sydney, though the difference in unit rents between the two cities has hit an eight-and-a-half-year low,” Dr Powell said.
“If Sydney rents continue to fall and Canberra grows, the nation’s capital could soon become the most expensive capital city for unit rents.”
Last but not least, Domain’s report shows house and unit rents increased by $10 over the September quarter to $490 a week for houses and $390 for units in Darwin.
“Unit rents are also $10 higher than the same time last year,” Dr Powell said.
“This is the first time unit asking rents have increased annually since mid-2014 and it is the first time house rents have remained stable over the year since late 2017. This marks a significant turning point following a multi-year deterioration of asking rents.”
Emma Ryan is the deputy head of editorial at Momentum Media.
Emma has worked for Momentum Media since 2015, and has since been responsible for breaking some of the biggest stories in corporate Australia, including across the legal, mortgages, real estate and wealth industries. In addition, Emma has launched several additional sub-brands and events, driven by a passion to deliver quality and timely content to audiences through multiple platforms.
Email Emma on: [email protected]