Rental listings rocket in inner city Sydney and Melbourne

Property investors in inner city Sydney and Melbourne are scrambling for tenants, with travel restrictions and loss of income related to COVID-19 contributing to a massive rise in advertised rentals.

Data from the latest ANZ-CoreLogic Housing Affordability report shows the number of advertised rentals in inner Melbourne rose by 57 per cent from March to June, while Sydney’s CBD and inner south both recorded a 53 per cent jump. 

That oversupply has resulted in plunging rents in near-city suburbs, with rents in Sydney’s Haymarket down 7.2  per cent to an average of $748 per week, the biggest fall in the country.

Rents were down 7 per cent in Barangaroo and 6.9 per cent in inner city Sydney, while in Melbourne, Southbank was the worst performing suburb, with median rents down 7 per cent to $525/week.

Inner Melbourne rents were down 6.9 per cent, while rents plunged by 6.5 per cent at Docklands.

ANZ economist Felicity Emmett said inner city rental markets had been affected acutely by the coronavirus pandemic, with workers in service industries hardest hit by the crisis also most likely to be tenants.

“Nearly 40 per cent of people who work in the accommodation and food services sectors rent,” Ms Emmett said.

“Between the weeks ending March 14 and June 27, 21 per cent of hospitality workers lost their jobs, compared to an average of 6 per cent across all industries.”

Ms Emmett said a lack of overseas migration had also contributed to the deluge of rentals hitting the market, with 80 per cent of newly-arrived migrants taking up a rental property.

“This dropoff in demand will impact regions popular with migrants, including inner city and south-eastern Melbourne, and inner south west Sydney,” she said.

Meanwhile, Perth’s rental market has proven to be one of the standout performers throughout the pandemic, despite Western Australia’s sky-high unemployment rate.

Perth’s Shelley was the WA capital’s worst performing suburb between March and June, but rents fell by just 1.3 per cent to $448/week.

Rents in the blue-chip western suburbs of Dalkeith and Crawley were down 1 per cent over the period, while rents in the near-city suburb of Burswood fell by just 0.9 per cent.

The number of properties available to rent in inner Perth fell by 8.2 per cent over the period.

It was a similar story in Darwin, where just one suburb - Gray - recorded a rental decrease of more than 1 per cent, at 1.3 per cent.

Adelaide’s leasing market has also been largely insulated from the crisis, with its worst-performing suburb of Goodwood recording a 2.8 per cent fall in median rents.

Median rents were down 2.3 per cent in North Adelaide, and 2 per cent in Adelaide’s inner city.

In Brisbane, the inner city recorded a median rent fall of 3.6 per cent, while rents fell by 3.3 per cent in South Brisbane, and 3.1 per cent in Hawthorne. 

CoreLogic head of research Eliza Owen urged landlords not to panic, despite the reduced competition driving rental values downwards.

“The oversupply of rental stock since March has been largely confined to inner city areas in Melbourne and Sydney, while all other capital cities have experienced a decline,” Ms Owen said.

“There are still opportunities for investors where rental markets have continued to tighten and rental values have increased.”

The ANZ-CoreLogic report follows similar data released by the Real Estate Institute of New South Wales earlier this month.

REINSW said vacancies increased for the fourth consecutive month in June, with the overall vacancy rate 4.5 per cent.

REINSW chief executive Tim McKibbin said vacancies in the inner ring of Sydney had hit record highs in June, at 5.8 per cent.

“The impact of COVID-19 on the residential rental market continues to be significant and shows no sign of abating,” Mr McKibbin said.

“For Sydney’s inner ring, if this trend continues, as it’s likely to for the foreseeable future, we can expect to see downward pressure on rents.

“While this is great news for tenants, it’s a recipe for disaster for many landlords.”