Rents plummet in cities due to COVID
COVID has been a real mixed bag for landlords across the country. While landlords in coastal locations and lifestyle suburbs have tenants knocking at their front doors, landlords in city locations are being forced to lower rents.
The pandemic has really turned the real estate market on its head. With many people working remotely, both buyers and renters are revaluating where they will live – with many fleeing cities for sea and tree changes.
New CoreLogic data reveals that between July 2020 and July 2021, coastal suburbs or suburbs with scenic landscapes have recorded rental increases of more than 70% due to soaring demand. In these same suburbs, vacancy is at a record low.
So, what does this mean for city dwellings? Well quite simply they are dropping in price. In a bid to lure tenants back, many landlords in Melbourne and Sydney have no other option than to reduce rent – or their properties will lie vacant. In some blue chip suburbs, tenants are finding places they were previously priced out of.
The CBDs have been hit the hardest by international border closures and people opting to work from home. There simply is little attraction to living in the city compared to other more picturesque locations.
We’re seeing declines seen in some of Sydney’s most prestigious suburbs, such as Tuross Head and Clovelly. With median weekly rents for houses in Sydney’s beachside suburb of Clovelly falling 37% over the year, from a median of $2025 in July 2020 to $1275 in July 2021.
Up the road 15 minutes, units in Point Piper recorded a 33% decrease in weekly rents from $1500 in July 2020 to $1000 in July 2021.
We’re starting to see early warning signs that the extended lockdown in Sydney will result in another exodus from the city centre – spelling out more trouble for city landlords. Currently, we’re seeing vacancies rates rising up to 6.1% from 5.6% in June.
SQM Research believes the new lockdowns may have triggered another wave of interest in regional living as many of the community seek freedom away from harsh COVID measures. Unsurprisingly, as city rents drop the regional prices are increasing.
In Melbourne, things are equally challenging for landlords, though things are starting to look up. From their peak vacancy rate in September 2020 of 10.8%, the vacancies have now dropped 8.2% – well below pre-pandemic levels.
Data from realestate.com.au found median asking rents for units in Melbourne’s CBD, which was hit hard by last year’s extended lockdown, fell 25% over the year to $375 per week in July 2021.
The latest lockdowns aren’t going to help either – and not just the CBD but suburbs all over Melbourne. With the latest lockdown as number 6 for Melbourne, we can expect even more Melbournites to flee what is no longer easy living.
Suburbs near unis are also struggling with a decrease in international students due to border closures. The average weekly median rent for units in Carlton, near The University of Melbourne, fell from $450 to $335 over the year, a 25.6% decrease. Unit rents in Caulfield East near Monash University fell by 26.7%, from $430 to $315 per week.
On the flipside, rents are soaring in regional and coastal towns. Marcoola on Queensland’s Sunshine Coast recorded the strongest growth, with weekly median rents rising 78% to $650 in July 2021, up from $365 a year earlier. Insane.
Queensland has seen strong interstate migration from New South Wales and Victoria over the past 12 months which has driven up rental demand. And why wouldn’t they. It seems the heat in the sunshine state is keeping COVID at bay with the state rarely going into lockdown.
But never fear Sydneysiders, property values overall are fairing well. Landlords, while your rental income may be dwindling, you can take comfort in your consistent capital growth.