Property rentals see biggest price drop in 15+ years | Domain Rental Report
Unit rentals experienced the biggest price drop in more than 15 years, marking a historic rent price fall of 3.2% (equivalent to $15 per week) over the June quarter according to Domain.
House and unit rental prices fell across most major capitals, illustrating no city was immune from the impact of coronavirus, with Sydney and Hobart unit rentals hardest hit — both recorded the steepest quarterly fall on record.
More than a quarter of advertised rental properties across Melbourne have had their asking prices slashed in recent months as landlords tried to lure new tenants in the midst of the coronavirus outbreak.
At the same time almost a third of rental properties in Sydney have been discounted since the COVID-19 pandemic hit Australian shores, as landlords battle it out to secure tenants.
At Metropole Property Management we found the situation worse at the height of the lockdown, but over the last six weeks, we have found more tenants out looking for new premises in both Melbourne and Sydney, and we manage to lease properties promptly and keep the vacancy rate for our landlords below industry averages and using innovative marketing and inspection techniques.
There is no doubt that the new lockdown in Melbourne will create challenges, but having work through these recently we have the systems in place to minimise vacancies and assist both our landlord and tenant clients.
Domain Senior Research Analyst, Dr Nicola Powell commented on the current rental situation: -
“The rental market has become highly fragmented in recent months.
With weaker conditions for units compared to houses, tenants have a better chance of nabbing a cheaper unit.
Nationally, unit rentals experienced its biggest price drop in more than 15 years, marking an historic rent price fall of 3.2 per cent over the June quarter.
Rental prices fell across most major capitals, illustrating no city was immune from the impact of coronavirus, with Sydney and Hobart units recording the steepest quarterly fall on record.
This weakness has been led by significant rent reductions in Sydney and Melbourne inner-city areas due to a surge in advertised rentals from March to June,” said
Here's the latest from across Australia with Dr Nicola Powell's comments:
June 2020 QoQ change for Sydney rental prices
Unit rent fell over the quarter and year, representing the sharpest decline in more than 15 years, with rents now at its lowest in half a decade.
With house and unit rents falling by as much as $50 a week in areas like the city and eastern suburbs, tenants are in a strong position to negotiate prices or seek out cheaper properties.
Sydney’s rental market conditions have become highly varied.
House rents remained stable over the quarter and year, and are 3.6 percent below the 2017 peak.
Rents fell in the quarter across several Sydney regions, tumbling as much as $50 a week in the city and eastern suburbs and $40 a week in the northern suburbs.
Tenants are in a strong position to negotiate prices or seek out cheaper properties.
Rental price growth appears to be supported by more stable conditions across Sydney’s outer areas while house rents fell substantially in the inner areas.
There were also significant increases in advertised rentals in Sydney’s inner areas at a time of weakened demand.
Foreign student numbers and overseas migration have plummeted, as well as a drop in tourism.
These are also areas more exposed to drops in migration, tourism, jobs losses and have a high portion of rentals.
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 east, 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.
Tenants now have the novelty of choice.
The rapid rise in advertised rentals have put pressure on rents.
Tenants are using this as bargaining power to negotiate a deal while landlords compete to lure them.
The number of advertised rentals jumped almost 13 per cent across Sydney from March to June, surging 43 per cent in the city and east and 29 per cent in the inner west, as a wave of short-term rentals converted to long-term as border closures curtailed international tourism.
Demand has weakened as migration ceases, international students remain offshore and economic uncertainty rattles many tenants, forcing them to evaluate their personal circumstances,
June 2020 QoQ change for Melbourne rental prices
House and unit rents fell over the June quarter, with unit rents recording the first annual fall in 15 years.
With Inner Melbourne seeing house rents drop by $40 and units by $35 a week over the June quarter, alongside a rapid increase in the number of properties for lease, tenants are in a strong position to negotiate prices as their options expand.
Melbourne’s rental prices fell over the June quarter for both houses and units.
While house rents remained stable over the year, 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, which also has a greater exposure to the industries most vulnerable to the job losses associated with the coronavirus pandemic and has a high proportion of households renting.
Vacancies are likely to remain high in the coming months across metropolitan and tourist areas, which could result in further rent reductions.
Any potential renewed short-term demand from interstate travel has been curtailed as Melbourne enters a second lockdown.
June 2020 QoQ change for Brisbane rental prices
Brisbane house and unit rents fell over the June quarter, although rents remained flat over the year.
While the Brisbane rental market has not been as impacted compared to other cities, international border closures, plummeting foreign student numbers, job losses and pay cuts have still made their mark, with Brisbane’s CBD particularly exposed to reduced rental demand. The number of advertised rentals jumped from March to June and more landlords have cut asking rents.
Brisbane house and unit rents fell over the June quarter, although rents held steady over the year.
The rental market is fragmented across Brisbane’s regions.
House rents in higher priced areas weakened, while prices in more affordable areas were steady in their asking rent.
Units in Brisbane city had the steepest quarterly fall while several areas remained stable or marginally increased.”
Brisbane’s vacancy rate has nudged higher compared to last year, despite this the number of advertised rentals are shrinking from the time of the city’s construction boom.
It stems from the recent reduced demand temporarily lifting the number of available rentals.
To date, the Brisbane rental market has not been as affected compared to other capitals, but international border closures, plummeting foreign student numbers, job losses and pay cuts have had an impact.
Brisbane’s CBD is particularly exposed to the reduced demand, with advertised rentals jumping from March to June and more landlords cutting asking rents.
Sunshine Coast rents remain at record highs, with houses at $500 a week, steady from last quarter and units at $410 a week which have held at this high for a year.
The Gold Coast is a two-speed rental market: house rents remain at a high of $520 but unit rents dropped over the quarter and year, marking the first annual fall since 2013.
Gold Coast unit prices are likely to be more exposed to a drop in international tourism.
Unit rents in Adelaide remain the second most affordable of any Australian capital, recording the strongest annual growth since 2011.
Adelaide is one of the stronger rental markets of all the major capitals. For those looking to move to the city, securing a lease remains competitive. It has the second lowest vacancy rate, which has declined and steady asking rents.
Adelaide asking rents are steady at the record high hit last quarter, at $395 a week for houses and $320 for units.
Over the June quarter, house rents held steady in only two cities, Adelaide and Darwin.
Adelaide remains the second most affordable city to rent a house and could overtake Brisbane in coming months if rents continue to fall there.
Rents remain lower compared to other capitals, but relative affordability is declining for units - prices in Adelaide have recorded the strongest annual growth since 2011.
Adelaide offers greater value for money compared to other capital cities.
As we resurface from the coronavirus lockdown, it could become a drawcard destination for those seeking affordability.
Securing a lease remains competitive because Adelaide has one of the stronger rental markets of all the major capitals.
It has the second lowest vacancy rate, which has declined, and steady asking rents.
Advertised rentals lifted early in the year, helping to keep rents stable, but stock levels appear to be shrinking again.
Investor activity has been subdued in recent years and multi-unit construction targeted at investors constrained compared to other cities.
This has helped to limit rental supply
June 2020 QoQ change for Perth rental prices
House rents declined marginally from the three-and-a-half year high achieved last quarter, while unit rents held steady at $320 a week, the highest asking price since mid-2016.
Perth’s rental market has bounced back from the post-mining boom lull, with advertised rentals continuing to shrink, giving landlords ground to raise asking rents in certain areas.
Rental discounting has been concentrated in Perth's inner-city region, and now is time for those looking to move closer to search for a rental bargain.
Perth’s rental recovery looks set to continue.
House rents declined marginally by $5 a week from the three-and-a-half year high achieved last quarter.
Unit rents held steady at $320 a week, the highest asking rent since mid-2016.
The market has improved considerably from the post-mining boom lull.
The number of advertised rentals continues to shrink, down 19 per cent from March and has dropped 32 per cent over the year.
Tenants will find rental conditions have tightened.
The number of vacant rental properties is steadily shrinking, providing landlords greater grounds to raise asking rents in certain areas.”
During the height of the pandemic lockdown, rental discounting lifted marginally, although consistently fewer rentals are being discounted compared to last year.
Discounts have been largely concentrated in Perth’s inner-city which has more plentiful apartment rental supply.
June 2020 QoQ change for Hobart rental prices
Hobart recorded the sharpest rental decline of all capital cities during the June quarter.
Rental asking prices for units dropped by $35 a week, bringing rents back in line with Darwin and Brisbane. It’s now tied as the second most affordable capital in Australia.
House and unit rents slipped from the peak achieved last quarter.
Houses declined $20 and units $35 a week from March to June, stalling annual growth.
This weakness follows a stint of strong growth that spanned more than half a decade.
House rents have surged 36 per cent and unit rents 41 per cent in five years, leading rent growth across the capitals during this time.
Despite the recent falls, Hobart has the lowest vacancy rate, and remains the tightest rental market of all the cities.
Over a few years Hobart units rents have transitioned from the most affordable in 2016 to the third most expensive by early 2020.
The steep quarterly decline has now pushed rents back on par with Darwin and Brisbane, making them the second most affordable.
Given a large part of Hobart’s economy is driven by tourism, many landlords had been lured by the lucrative incomes of short-term holiday lets.
The coronavirus pandemic has been detrimental for the tourism industry, and landlords were quick to seek longer-term tenants in order to retain cash flow during this time.
Advertised rentals rose at the height of the lockdown but have begun to tighten again as restrictions ease.
Vacancies are likely to remain higher in the coming months, although as restrictions ease and people resume interstate travel, hefty falls are unlikely to continue.
June 2020 QoQ change for Canberra rental prices
Despite rental prices sliding over the quarter, conditions remain competitive as tenants compete in the third tightest capital city rental market.
Although asking rents are down, those looking for a property should look to secure a rental sooner, as vacancies look to be tightening again over the coming months.
House and unit rents fell from the highs of last quarter, down $5 and $10 a week respectively.
Unit rents held over the year following half a decade of annual growth.
House rents are higher than a year ago.
House rents have increased 28 per cent and unit rents 22 per cent in five years, the second strongest growth across the capitals during this time.
Rising vacancies and weakened demand have pushed asking rents down recently, but this could be short-lived - vacancies look to be tightening again.
Despite rental prices sliding over the quarter, rental conditions remain competitive as tenants compete in the third tightest capital city rental market.
Weakening rental prices have impacted yields, with units falling from the record highs of last quarter.
For investors, unit gross rental yields remain attractive considering they offer the second highest of the cities, as rental conditions have begun to tighten again.
June 2020 QoQ change for Darwin rental prices
Darwin was the only capital city house rents held stable over the quarter and year.
House and unit rents remained well below the 2013 peak by 31 per cent and 33 per cent respectively, and these market conditions make it a great time for new residents to find a bargain rental.
Darwin was the only capital city house rents held stable over the quarter and year, while most others fell over the quarter.
Unit rents in most other capitals fell over the June quarter but Darwin held steady along with Adelaide and Perth.
House and unit rents remain well below the 2013 peak by 31 per cent and 33 per cent, respectively.
For investors, steady rents and affordable purchase prices have propelled gross yields to the highest of all the major capitals.
Unit gross rental yields are the highest in more than 15 years.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
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