Asking rents rise despite latest round of lockdowns: SQM Research

Pockets of the rental market are picking up despite the latest round of lockdowns, with asking rents rising or holding steady in major cities and regional areas, new figures show.

But the number of vacant properties also edged up, with rental vacancy rates holding at elevated levels in the Sydney and Melbourne CBDs, hard hit by the loss of international students last year.

Smaller capital cities face a dearth of rentals, with potential tenants finding slim pickings and, in many cases, rising rents.

Sydney asking rents are 1.4 per cent higher for houses in the month to August 12 compared to a month earlier, and 0.3 per cent higher for units, SQM Research found.

Melbourne house rents rose 0.5 per cent over the month while units gained 0.8 per cent.

SQM Research managing director Louis Christopher said it was “somewhat perplexing” to see the rental market improve during COVID-19 restrictions but noted there is a lockdown effect that prompts those working remotely to seek more spacious accommodation.

House rents rose faster than unit rents nationally, at 1.3 per cent and 0.5 per cent, respectively.

“With this new lockdown, and with … especially the knowledge workforce working from home, people are seeking larger properties to be able to do that,” Mr Christopher said.

“Landlords may be wishing to keep their second property free, unoccupied from any tenant, with a view that they themselves will occupy that property in a bid to escape lockdown.”

Asking rents rose or held steady for both houses and units across Perth, Canberra, Brisbane and Hobart, but were mixed in Darwin and fell in Adelaide.

Mr Christopher noted there were larger increases in regional asking rents compared to the capital cities, suggesting the lockdowns may have prompted a new rush of city dwellers making a tree change.

Rental vacancy rates were little changed in the month, with 61,313 rental properties vacant in July, slightly higher than 60,468 in June.

Melbourne’s vacancy rate edged up to 3.6 per cent, up 0.1 percentage point, in the month, while Sydney declined by the same amount to 2.7 per cent.

In the hard-hit inner cities, Sydney CBD vacancy rates rose to 6.1 per cent while Melbourne fell to a still-high 5.7 per cent.

It’s a marked contrast to all other capitals, with Brisbane’s vacancy rate steady at 1.3 per cent and every other capital holding below 1 per cent.

Leasing agents on the ground said rental markets that were starting to recover momentum were feeling the brunt of the lockdowns.

“Things were starting to actually gain momentum before this recent lockdown insofar as there was footfall, there were people attending open inspections; the enquiry level was good,” MICM senior property manager Joe Carpino said of inner Melbourne.

“This current lockdown has put a dampener on things. We’re back to square one because we can’t open properties,” he said. “I’m advising landlords to sustain the rent and perhaps, if the properties have been on the market for a while, to reduce.”

Harcourts Melbourne City’s Dionne Wilson concurred, saying rents had been stabilising but tenants were price-sensitive.

In normal times, she said, her listings would have about a 2 per cent vacancy rate, but at the height of 2020’s long stage-four lockdown this rose to 38 per cent. The metric has now dipped under 10 per cent.

“Yes there was some improvement, however, the current lockdown is likely to see that creep up again,”Ms Wilson said. “People [are] able to vacate but it’s more difficult to lease.”

She has encouraged landlords to be flexible with lease durations and asking rents, saying CBD vacancy rates would need to drop below 5 per cent before rents rose.

In Sydney, the real estate industry has been able to operate private inspections during lockdown, but Colliers International’s Nick Taouk said he had seen conditions start to shift.

“I’ve noticed in the past week and a half, two weeks, it’s probably got a bit quieter because more local government areas are in [strict] lockdown,” he said. “Probably two weeks ago I was pretty much swamped … this week it’s taken a bit of a backward step.”

Given the lower enquiry levels, Mr Taouk said, he had been suggesting a slight rent reduction to landlords, and many were open to the idea.

“Like all businesses and the economy,” he added, “we just have to wait for things to improve.”