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RISING RENTAL VACANCIES & FALLING RENTS?



Are rental vacancies rising and rent prices falling?

As is always the case, well-selected properties in fundamentally supported markets will stand strong, whilst other properties in less favourable markets will be abysmal. 

Suburbs that are overstocked, too few owner-occupiers, or whose renters are mainly employed in the sectors most affected by the pandemic such as in hospitality, leisure, recreation or tourism, will all struggle during this period.


COVID-19's Impact On Rental Vacancies

According to figures released by SQM Research, all capital cities recorded declines in vacancy rates over the past month (June 2020) [1].


Sydney currently has the highest vacancy rate in the nation at 3.8%, having declined by 0.2%, followed by Melbourne with a vacancy rate of 3.0%, declining by 0.1%.

Hobart’s vacancy rate is the lowest in the nation at 0.9%, having declined by 0.4% over the month. Additionally, Darwin recorded the largest decline in the rental vacancy rate of 0.5% to now record a low vacancy rate of 1.8%.


COVID-19's Impact On Asking Rent Prices

Domain data for June showed that capital city asking rents decreased 3.1% for houses and 4.5% for units, for the week ending 12th July, to record asking rents of $534 per week for houses and $421 per week for units [2].


If we take a closer look at these markets their performances are greatly influenced by their proximity to the CBD and the dwelling configuration.

Asking rents for one-bedroom units in Sydney and Melbourne experienced the most significant falls over the June quarter, followed by two-bedrooms.


Three and four-bedroom units in Sydney and Melbourne remained relatively stable or grew for three-bedroom units in Melbourne.


Typically, inner-city hubs will have a more plentiful supply of one-bedroom dwellings and they have greater exposure to international students, overseas migration, tourism, and the job losses associated with the pandemic.


One-bedroom units could particularly be vulnerable to the decline in overseas students. Another possible explanation could also be attributed to the result of singles or couples moving back into the parental home, or into a house share arrangement to reduce their living expenses.


Interestingly, over the same period, inner-city houses remained relatively unchanged whereas outer-city areas have seen small to moderate declines.



Key Takeaways

When considering purchasing an investment property, it is important to take a medium to long term view and ensure you are buying the right property, in the right market and most importantly, for the right price.


It is also imperative to understand the underlying fundamentals of each market to avoid making a costly mistake and speak with qualified professional prior too engagement.


To stay up-to-date on all things property investment make sure you join our Property Market Pulse Newsletter here.


Bradley Wearne - General Manager & Head of Research at Meridian Australia

P: (02) 9939 3249

E: brad@meridianaustralia.com.au

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References

[1] SQM Research

[2] Domain Group


Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.

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