Melbourne unit rents fall to three year low while houses grow.
By | 3rd Dec 20

Apartment rents across Melbourne have fallen dramatically for the second time in six months, suffering the steepest falls of any capital city, new data shows.

The Domain Rent Report, released on Thursday, revealed apartment rents across the city are at their lowest median asking price in three years having slipped by a further $15 a week to a median of $400.

It now costs the same amount to rent a unit in Melbourne as it does in Hobart.

It’s a change that has happened swiftly and dramatically across the city in 2020, Domain senior research analyst Nicola Powell says.

“The pandemic has had a once-in-a-lifetime impact on the rental market, reducing demand at a time supply has bounced,” she said.

“In a matter of months Melbourne has become a tenants’ market, with the number of vacant rental properties more than doubling since March.

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Unit rents, September quarter 2020 – capital cities

City Median weekly rent QoQ YoY
 Sydney $495  -1.%  -4.8%
 Melbourne $400  -3.6%  -4.8%
 Brisbane $395  3.9%  3.9%
 Adelaide $340  6.3%  9.7%
 Perth $340  6.3%  9.7%
 Canberra $480  1.1%  3.2%
 Darwin $390  2.6%  2.6%
 Hobart $400  5.3%  1.3%
 National $447  -0.8%  -2.9%

Source: Domain Rent Report, September quarter 2020

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 “This is magnified in inner-city areas which are more susceptible to changes in overseas migration and international students, tourism and job losses associated with COVID-19.”

But it’s not all bad news for landlords. The cost of renting a house in Melbourne has actually become more expensive, with the median asking rent up 2.3 per cent, or $10 per week, to a median $440 per week over the past quarter.

“House rents have reversed the fall recorded last quarter, supported by gains across Melbourne’s outer suburban areas. Government policies have supported renters and landlords during an economically challenging time, which has stopped significant widespread rental price falls,” Dr Powell said.

Melbourne’s rising rental price for houses was largely driven by demand from tenants seeking out cheaper and larger rentals as they were forced to stay at home to work, with families in particular moving from the inner city, Ray White Victoria and Tasmania chief executive Stephen Dullens said.

House rents, September quarter 2020 – capital cities

City Median weekly rent QoQ YoY
 Sydney  $540  1.9%  2.9%
 Melbourne  $440  2.3%  2.3%
 Brisbane  $415  3.8%  2.5%
 Adelaide  $405  2.5%  5.2%
 Perth  $395  6.8%  6.8%
 Canberra  $580  1.8%  5.5%
 Darwin  $490  2.1%  0%
 Hobart  $450  0%  0%
 National  $460  2.9%  3.2%

Source: Domain Rent Report, September quarter 2020

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“In the outer metro suburbs, particularly for houses, there has been a lot of demand,” Mr Dullens said.

Melbourne’s unit market has borne the brunt of the stage four lockdown, especially inner-city areas like the CBD, Southbank, Carlton and North Melbourne, where hospitality workers, students and international students normally make up the bulk of tenants.

Rents there plummeted by 6.7 per cent over the quarter and 10.6 per cent over the year to a median of $420 per week.

Other areas of inner Melbourne such as the inner east’s Hawthorn, Kew and Camberwell and inner south’s Brighton, Sandringham and Beaumaris were also hit hard. Rents in those regions fell by 4.8 per cent or $20 per week over the quarter, dropping the median rent to $400 per week. 

Unit rents, September quarter 2020 – Melbourne

REGION MEDIAN WEEKLY RENT QOQ YOY
 Inner  $420  -6.7%  -10.6%
 Inner East  $400  -4.8%  -5.9%
 Inner South  $400  -4.8%  -5.9%
 North East  $370  0%   1.4%
 North West  $360  0%  -1.4%
 Outer East  $385  0%  1.3%
 South East  $365  1.40%  4.3%
 West  $340  0%  -1.4%
 Mornington Peninsula  $350  2.9%  4.5%

Source: Domain Rent Report, September quarter 2020

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But for  tenant Nicolas Gorroño, Melbourne’s declining rental prices in the inner city came as a massive relief, helping not only his bank balance but also his mental health.

He was able to negotiate a $50 reduction in rent for a townhouse in Brunswick West when he moved in with his girlfriend recently.

[Nicolas Gorrono]
Nicolas Gorrono managed to wrangle a lower rental price for the Brunswick West townhouse he and his girlfriend share. Photo: Joe Armao

“I was previously in a one-bedroom apartment, which was not good for my mental health especially since I was living on my own,” Mr Gorroño said. “I managed to wrangle the rent down and we got a bigger place for the both of us.”

Jellis Craig Brunswick business development manager Elliott Heslop said it had been a mixed market in the inner city, with one-bedroom, one-bathroom apartments struggling to find tenants, while larger properties were proving popular.

“We’ve just rented an apartment on Lygon Street in Carlton which went really well,” Mr Heslop said. “It had a study nook in the master bedroom … which normally wouldn’t have made that much of a difference, but it has now.”

Landlords had been dropping rents – in some cases by as much as $100 per week – to attract tenants to smaller apartments, he said.

Even so, some parts of Melbourne have seen unit rents buck the downward trend and become more expensive.

In the Mornington Peninsula, where many Melburnians fled to escape the pandemic, apartment rents rose by an impressive 2.9 per cent in the quarter (4.5 per cent year-on-year) to $350 per week. Likewise, the south east, including Clayton and Dandenong, was up 1.4 per cent (4.3 per cent year-on-year) to $365 per week.

House rents, September quarter 2020 – Melbourne

REGION MEDIAN WEEKLY RENT QOQ YOY
 Inner  $595  -0.8%  -4%
 Inner East  $570  -3.4%  -3.4%
 Inner South  $625  -2.3%  -0.8%
 North East  $410  2.5%  2.5%
 North West  $400  0%  0%
 Outer East  $450  2.3%  2.3%
 South East  $410  2.5%  2.5%
 West  $386  1.4%  -1.2%
 Mornington Peninsula  $430  2.4%  7.5%

Source: Domain Rent Report, September quarter 2020

For houses, Melbourne’s outer suburbs held up best with the Mornington Peninsula again leading the pack, up 2.4 per cent to a median $430 per week. The south east’s Clayton and Cranbourne and north east’s Wollert and Hurstbridge also rose by 2.5 per cent over the quarter to $410 per week median rent.

For tenants in those areas, upwards pressure on rent prices during a recession has taken its toll. An Australian Housing and Urban Institute (AHURI) study, also released on Thursday, revealed around 40 per cent of were unable to afford the bare necessities including food after they had paid their rent.

The survey of 15,000 renters, part of the Australian Rental Housing Conditions Dataset dealing specifically with the COVID-19 pandemic, found 60 per cent of tenants had either lost their job or had a change in their work circumstances.

University of Adelaide Professor of Housing Research Emma Baker said the data painted a very bleak picture, but also opened up opportunities to fix some of the biggest issues for renters.

That included ensuring minimum standards of rental properties were met across all states and territories and introducing longer leases for housing stability.

Professor Baker said targeted assistance was needed for tenants in most need. That included people renting privately who had lost work, and single parents.

“Private tenants have done worse than those in social housing and families, including single parents, have also done worse,” she said.

 

Original article published on Domain: Click here to read