‘Worst time to be a landlord’: Rental market split
Negative overseas migration for the first time in 27 years has split rental markets across Australia and created clear groups of winners and losers.
A new analysis shows vacancy rates have more than doubled in some apartment-dense suburbs - bad news for landlords but great for tenants seeking to negotiate lower rents.
Inner-city rents have dropped in most major capitals, but have risen sharply in other suburbs and regional areas.
However, the worst appears over, according to the analysis by Investment group Binnari Property, which crunched data from the Australian Bureau of Statistics, CoreLogic and SQM Research.
Binnari Property managing director, David Hancock, said rents had fallen hard in areas of high apartment supply that traditionally serviced overseas student markets - such as Parramatta in Sydney and Docklands in Melbourne.
"New South Wales, Victoria and Queensland generally account for over 85 per cent of all overseas migration, meaning the travel restrictions due to COVID had a much greater impact on those markets," he said.
The latest Bureau of Statistics data shows net overseas migration was negative 5900 people in 2020's June quarter. Fresh data to be released in late March is certain to show even heavier falls, with government forecasts at negative 71,600 people for this financial year, and negative 21,600 for 2021-22.
Before COVID struck, overseas migration totalled almost 240,000 people in 2018-19.
Mr Hancock said rental property markets were starting to see signs of positive growth, although Melbourne's recovery would take longer because of "the sharp fall in international students and numerous lockdowns".
Realestate.com.au chief economist Nerida Conisbee said rents were falling even where unit prices were rising and the falls were "specific to areas that have had high levels of development".
For example, unit prices in Adelaide's CBD had climbed but rents were down 2.2 per cent, Ms Conisbee said, while Brisbane CBD prices were up 1.5 per cent while rents had dropped 10.7 per cent.
"There's a big difference between houses and units, and Sydney and Melbourne units and the rest of Australia," she said.
"If you are a landlord, now is probably the worst it's going to be.
"Now employment's coming back, foreign students will return and overseas migration will start up again."
A full recovery would take time, Ms Conisbee said, and would depend on Federal Government moves to increase migration after our international border reopened.
"As a place to live, Australia is looking so amazing at the moment. There's going to be a lot of economic migration coming out of COVID and Australia is really attractive."
Sydney-based property investor Sarah Swarbrick, 27, reduced the rent on her one-bedroom unit in Melbourne from $470 to $415 a week, and plans to ride out the current weakness.
"The tenant requested a rent reduction, and it's worth keeping somebody in the property," she said.
"I'm not planning to sell the property - it's a long-term investment.
"My partner has two properties in Queensland and they haven't been affected at all. In Queensland life hasn't changed much but the CBD in Melbourne has been impacted more severely."
Ms Swarbrick said it was a "good system" when tenants were able to negotiate rent reductions with their landlords.
Originally published as 'Worst time to be a landlord': Rental market split