Top 5 rental markets hit hardest by COVID-19

“Prior to COVID-19, the Australian rental market was already weak. Now, new challenges are here,” Ms Owen said.

“As Australian borders remain closed to tourists, and government policies restrict short-term rental arrangements, Airbnb rentals are converting to long-term rental supply. The added supply means rents could go down.

“This is compounded by a decline in demand. Rising job losses are seeing some tenants negotiate lower rents, or find alternative accommodation, such as choosing to move back with parents. A pause on the flow of international student and migrant numbers could see more properties sitting empty, while domestic students are less inclined to rent close to universities, as they access study remotely.”

Ms Owen said the impact on different regions will vary depending on how exposed markets are to tourism, migration and job losses.

The top 5 hardest-hit rental markets

According to Ms Owen, inner-city Melbourne and Sydney are being impacted the most, with CoreLogic data showing between the week ending 22 March and week ending 26 April, rental listings rose by 36.2 per cent and 34.1 per cent, respectively. 

Meanwhile, Sydney-eastern suburbs’ rental listings increased 22.8 per cent, followed by Adelaide-Central and Hills at 13.4 per cent, Warrnambool and South West at 13 per cent and the Gold Coast at 12.4 per cent.

The top 5 softest-hit rental markets

On the opposite end, the Sunshine Coast appears to have fared the COVID-19 storm, with rental listing increasing by only 0.2 per cent over the period in question.

Meanwhile, Melbourne-north east saw rental listings increase by 1 per cent, Sydney-Ryde by 2.5 per cent, West and North West by 2.6 per cent, and Hunter Valley (excluding Newcastle) and Brisbane inner-city both by 2.7 per cent.

Going forward

As well as elevated levels of recently completed dwellings, Ms Owen said part of the reason for higher vacancies in these areas is a “negative demand shock from employment and temporary restrictions on migration”.

“Rental markets are particularly susceptible to declines in overseas migration, because the majority of new migrants seek rental housing upon arrival in Australia.

“This will impact Inner Melbourne, which has previously maintained stable rental conditions amid high housing supply, because of rapid growth in international migration.”

Ms Owen added: “According to ABS migration data, the Melbourne council region population increased by 8,638 over 2018-19. But 99.5 per cent of this increase was attributable to overseas migration. This means that new rental demand in this area is almost entirely sourced from overseas migrants.”

“... Between high levels of migration and susceptibility to job loss, inner-city Sydney and Melbourne are already experiencing a sharp rise in rental supply.

“This will have a range of implications, including the potential for downward pressure on purchase values, an erosion of rental yields and added settlement risk for off-the-plan purchases approaching completion. For potential renters still in employment, this will also create cheaper accommodation options close to the city.”