COVID-19 has triggered a switch in power from landlords to renters across the country, with many tenants moving out of their inner-city rentals and leaving empty abodes in their wake.
Reduced demand for rentals and many renters looking for cheaper accommodation options is behind the power shift, according to realestate.com.au director of economic research, Cameron Kusher.
“Closed international borders have resulted in reduced rental demand and people under the age of 30 that profile as renters have overwhelmingly been impacted by COVID-19-related job loses, As a result, renters have a lot more power in negotiations currently than landlords do,” Mr Kusher said.
However, a 12-month analysis of median weekly asking rents on realestate.com.au has revealed some markets are proving more robust than others, with a number of suburbs recording strong double-digit growth.
Use our latest interactive to see how the median asking rent in your suburb has changed over the past 12 months…
Rents for houses in popular inner-city suburbs tended to increase the most, with Teneriffe in Brisbane leading the charge with a +48% jump in weekly asking rents over the year. Malvern, which neighbours the University of Adelaide, recorded a +30% increase in rental prices, while the trendy Brisbane suburb of Chelmer experienced a 25% rise.
Weekly asking rents for units also fared well in high-demand, inner-city locations, with rental prices in Canberra’s Yarralumla increasing by +37% and prices in Sydney’s picturesque North Manly increasing by +23%.
In terms of the suburbs leading the decline in rents, Sydney suburbs dominated with eight ranking in the top 10 for falls over the year.
House rents in Airds, located more than 50km from Sydney’s CBD, saw the biggest drops over the 12 months at -24%, while premium suburbs including Woolhara and Bronte also saw large rental price decreases with -12% and -14% respectively.
As for units, the industrial area of Meadowbrook, south of Brisbane, had a large -45% decrease in rent prices and Pagewood, near Sydney airport, saw a 23% drop. In Melbourne, Burnley, which boarders the CBD, experienced a 15% decrease in rent prices.
However, the 12-month suburb snapshot doesn’t tell the full story about how COVID-19 has impacted rental prices. Looking at larger geographies (SA4 statistical regions) allows for comparison between the first five-months of 2020 and the same period last year.
Tenants are taking advantage of cheaper rent in good areas
“The current market is certainly one in which renters have much more power in negotiations than landlords,” said Cameron Kusher, director of economic research at realestate.com.au.
He added, one reason behind rental price drops across Sydney could be a lack of demand from international renters while many tenants have been forced to move back in with Mum or Dad or to cheaper rental suburbs due to financial hardship from job losses.
“Due to closed international borders, there are no arrivals of permanent settlers and overseas students, both of which are a key source of rental demand in Sydney,” Mr Kusher said.
Rental house hotspots, Sydney’s Eastern Suburbs, North Sydney and Hornsby and Parramatta ranked as the top three regions in the list of 10 that experienced rent price drops in the first five months of 2020 compared to the same time last year.
As a result, tenants that previously couldn’t afford a rental in these areas are now finding them more accessible.
“We saw change when it first came about…vacancies started to open up and prices started to come down a bit just given the supply that was coming on to the market and the limited amount of people looking,” Mr Serrao said.
However, he added, the rental demand is slowly starting to increase especially as more tenants are taking advantage of more affordable rent in desirable areas they were previously priced out of.
“There are people in the headspace of, ‘I can get a good deal now’, and so they are shopping around. It doesn’t mean that they’re all leasing at the same price as what they were leasing at previously, but the demand is slowly slowly starting to catch up with the supply that’s out there.”
Mr Serrao added he has seen unprecedented interest from local renters as opposed to international renters, especially around Bondi.
“I think people who haven’t lived in Bondi before but have lived nearby in Randwick, Maroubra, or Kingsford want to break into the area,” he said. “Before they would have seen a $200-$300 price difference coming into Bondi, whereas now it’s probably been pulled back by $100-$150.”
Melbourne’s Inner South, Brisbane’s West and Darwin also came through in the list of top 10 regions that saw median weekly asking house rent drops in the first five months of 2020.
When it comes to units, Sydney areas continued to dominate the list of top ten regions where unit rents fell the most. Rental prices in the Outer West and Blue Mountains region experienced the highest rent drops in the country at -5.3%, closely followed by Outer South West and Ryde with median weekly asking rent price drops of -4.1% and -3.8% respectively.
The Australian regions where rental prices increased
While many Sydney regions experienced asking rental house price drops in the first five months of 2020, other parts of the country saw little impact from COVID-19 and continue to not only hold rental value, but have even grown.
Rental houses in Western Australia’s Outback (North) saw a 22.2% increase in median asking rental priced over the five-month period to a median weekly rent of $550, which could be due to the mining industry in the area.
Tasmania’s West and North West region also saw growth in rent for houses with a 7.1% increase to a median rental price of $300 per week. Meanwhile, Central Queensland experienced a 6.7% increase to reach a median house rent of $320 per week.
For units, Queensland’s Outback saw an impressive 19% increase in weekly asking rent price, and in Tasmania, the Launceston and North East region saw a 15.4% increase in unit rental prices.
While this is good news for investors and landlords, for tenants wanting to make the most of the current climate and secure cheaper rent, it’s well worth exploring neighbouring suburbs and areas, especially while many are working from home and able to avoid commutes.
An outlook for Australia’s rental market post COVID-19
While it’s difficult to say exactly how much weekly rental prices will change post-pandemic, tenants are likely to try to hold on to the power gained during COVID-19, according to Mr Kusher.
“Leases signed in early 2020 will be coming up for expiry, so it is reasonable to expect a lot of those renters will be seeking cheaper accommodation,” he said.
Chief executive of the Tenants Union of New South Wales, Leo Patterson Ross, warned against signing short-term leases, which may seem like a good deal now, but might not be a good long-term solution.
“You want to make sure you are clear about what you are getting. You don’t want to sign up to a shorter-term lease and the landlord may say ‘of course you can stay on’ but then in three months time when all the health restrictions are gone and the tourists are back, you’ll find yourself having to make way for that, Mr Patterson Ross said.
Going forward, Mr Patterson Ross suggested rental properties in premium inner-city suburbs will likely keep decreasing while other regions remain steady.
“Regional towns are less likely to see falls due to a reduction in tourism, and also because they are already at a more affordable price than the inner-city suburbs,” he said.
He predicted that affordable rentals will be in hot demand, especially as more people are experiencing financial hardship due to COVID-19.
“We haven’t added enough property at the lower end that is actually affordable offering relief for the majority, which means there’s still a lot of demand at the lower end of the market,” Mr Patterson Ross said. “So the lower end won’t really move much at all.”