Rent prices have fallen off a cliff during the pandemic – spurred by citywide lockdowns, international travel bans and industry closures that have reversed almost two years of growth.
And some analysts suggest the downturn could extend long after Victoria suppresses its second wave of infections, as hundreds of thousands of newly-jobless Australians struggle to regain employment.
CoreLogic’s Quarterly Rental Review revealed capital cities led the charge with rents falling 0.7 per cent over the June quarter, while regional centres experienced a comparatively modest 0.2 per cent drop.
Hobart saw the sharpest decline of 2.3 per cent (its biggest drop in eight years), with researchers attributing the plunge to the city’s high exposure to job losses within the arts, hospitality and tourism sectors.
Sydney and Melbourne experienced 1.3 and 1.0 per cent drops in rent asking prices respectively.
But CoreLogic head of research Eliza Owen told The New Daily these falls were the byproduct of an “enormous uplift” in rental supply, as overseas investors and students vacated Australia’s two largest markets.
“We know the majority of people when they come to Australia initially rent,” Ms Owen said.
“So when you have a massive demand shock and then, on the supply side, anecdotes of Airbnb owners attempting to convert their properties to long-term rentals, that enables tenants in those areas to negotiate lower prices.”
A separate report released by ANZ and CoreLogic last week showed the most significant rent reductions were typically found in inner-city areas, with some suburbs recording pricing falls more than five times the citywide average.
Rent in Melbourne’s Southbank, for example, fell 7 per cent over the June quarter to a median of $525, while the average price for rent in Brisbane’s CBD fell 3.6 per cent.
Adelaide shines as city insulated from shock
Despite most capital cities weathering falls across their housing markets over the June quarter, Adelaide’s market has proven resilient.
Not only did rents increase by 0.2 per cent over the past three months, but house prices also rose by 0.2 per cent.
Ms Owen said Adelaide had proven less susceptible to the impacts of the coronavirus pandemic as the city gained an early foothold on the virus, allowing economic activity to stabilise.
“The other key is that Adelaide is not a city where we see a lot of investor participation. It is relatively slow and steady, so it’s remained quite a reliable market for those that have a stake in it,” Ms Owen said.
Mixed predictions over the future of rent prices
Renters who retained jobs through the crisis have unprecedented bargaining power, Ms Owen said.
But she also noted that despite decreasing prices, affordability is largely unchanged, due to significant income losses across the economy.
The Australian Bureau of Statistics’ latest analysis of Single Touch Payroll data showed total wages paid between mid-March and the week ending July 11 fell 4.8 per cent.
And with Melbourne now three weeks into its second lockdown period, Ms Owen expects prices to sink even further.
“We’re seeing further reductions in social consumption, which will result in further job losses in associated industries and weigh further on falls in inner-city regions, but may become more broad-based across metropolitan Melbourne,” Ms Owen said.
“And JobSeeker and JobKeeper recipients are more concentrated among renting households as well, so declines in that stimulus will have a dampening effect.”
Despite that forecast, Simon Pressley, head of research at national buyers’ agency Propertyology, predicts rents could soon spike in parts of the country with vacancy rates of 2 per cent or lower.
Mr Pressley said more than five out of eight capitals have undersupply issues, which have been exacerbated by diminished investor activity through the crisis.