Rental markets hardest hit by coronavirus
Before COVID-19, Australia’s rental market was already on the way down. And now, head-to-head with unprecedented challenges, vacancies are up, and prices are down.
Over the past few months, we’ve seen borders closed, tourism dry up, and government policies introduced to restrict short-term rental accommodation. Airbnbs are increasingly entering the long-term rental market.
What’s more, forced restrictions have put many Aussies out of work. While some of these are now being lifted, we are still a long way away from normalcy. Economic struggles have pushed many to find cheaper living arrangements, whether that be securing a more affordable rental or moving back in with parents.
Closed borders also mean a sudden pause on the arrival of international students and migrants.
In short, supply is up, and demand is down. But not all markets have been impacted equally.
Inner-city Sydney and Melbourne are hardest hit
Data spanning the week ending 22 March to the week ending 26 April shows the number of rental properties available across Australia has increased by 0.8 per cent. This time period encompasses the onset of strict business shutdowns and border closures.
The most astounding figures have come out of Sydney and Melbourne’s inner-city areas, where rental listings have skyrocketed by 34.1 per cent and 36.2 per cent respectively.
One reason for these staggering increases is the elevated number of recently completed dwelling projects. Inner-city Melbourne has historically maintained stable rental conditions despite high housing supply thanks to the region’s significant international migration. According to ABS data, the Melbourne council’s population grew by just over 8,500 between 2018 and 2019. Incredibly, 99.5 per cent of this increase was credited to overseas migration.
Another driving factor is job losses. Areas vulnerable to job-loss caused by COVID-19 tend to have a higher proportion of renting households. ABS data shows that more than 1 in 4 accommodation and food services workers has lost their job. Further, the arts and recreation services industry experienced job losses of 18.7 per cent. People working in these industries are often young renters.
Job losses, minimal migration, and a tourism industry that’s on pause, inner-city Sydney and Melbourne are experiencing a significant rise in rental supply. Already, property owners are offering rental discounts in a bid to attract tenants, with some predicting a 10 per cent or greater decrease in rental prices.
A dip in rental demand is also likely to put downward pressure on property values and add risk to off-the-plan purchases that will soon be completed.
It’s not all doom and gloom, however. Renters still employed could snag a bargain closer to the city.