Rents fall across major capital cities with units hit the hardest: Domain Rent Report

The cost of renting is falling across most Australian capital cities, with a new report revealing apartment rents have recorded their biggest drop in more than 15 years.

The latest quarterly Domain Rent Report, released Thursday, revealed apartment rents have fallen farther than house rents since the onset of COVID-19, with the national median unit rent shrinking 3.2 per cent in the June quarter. Houses fell 1.2 per cent.

“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,” said Domain senior research analyst Nicola Powell.

Against a backdrop of border closures, wage cuts and job losses, asking prices for houses and units were either reduced or remained steady in what has become a “fragmented” national rental market, according to Dr Powell.

“Generally we’re seeing weaker conditions in apartments compared to houses,” Dr Powell said.

Median weekly rental asking price – Units

Source: Domain Rental Report, June quarter 2020

Hobart recorded the largest fall, with the median weekly asking price for apartments plunging $35 or 8.4 per cent to $380. Meanwhile, the median price for apartments in Sydney fell by $20 to $500. In Melbourne, the median unit rent stands at $415, down from $430.

Canberra reported a 2 per cent fall, while Adelaide and Perth’s apartment rental market held steady over the quarter. 

Inner-city areas with high concentrations of apartment buildings have fared the worst in recent months. “That’s because these areas have seen a strong lift in the number of advertised rentals between March and June,” Dr Powell said. 

“You have to remember increased supply is occurring when we have weakened demand, driven by border closures and the halt to tourism, migration and the arrival of international students.”

Domestic students were also likely to remain in the family home and study remotely, rather than rent their own apartment, she said. 

The surge in CBD listings was partly driven by short-stay accommodation providers turning their properties over to the rental market during the lockdown. 

Soft apartment figures fell in line with the predictions of AMP Capital chief economist Shane Oliver.

“The people who rent houses tend to be better off and perhaps in jobs that were less affected by the shutdown,” he said. “Whereas people in units are more likely to work in retail, accommodation, food preparation where wages are lower and the layoffs were concentrated.”

Mr Oliver warned that, in the absence of a vaccine, the virus could potentially deliver a long-term hit to city rents. “The virus itself has made apartment living less popular,” Mr Oliver said. “They’ve called them vertical cruise liners.”

Median weekly rental asking price – Houses

Source: Domain Rental Report, June quarter 2020

Hobart had the largest disruptions over the quarter, with house rents dropping 4.3 per cent and unit rents plummeting 8.4 per cent over the quarter.

Angie Zigomanis, director of property advisory firm Charter Keck Cramer, said the Tasmanian capital had previously enjoyed “a really good run” that saw vacancy rates fall below 1 per cent and the cost of renting a house overtake Melbourne.

“A big part of that was it was gaining population growth from other states,” Mr Zigomanis said. Shutting the borders had weakened demand and caused prices to soften.

Adelaide and Perth remain the cheapest cities in the country to rent, and were largely stable during the height of the pandemic.

Mr Zigomanis said Adelaide had fairly limited population growth. “It gains people from overseas but doesn’t take a big share, and it loses population to the other states so in some respects that is offsetting each other.” 

Similarly falling overseas migration had not impacted Perth greatly either, he said.