Tue. Dec 7th, 2021

It’s a similar story on Victoria’s Mornington Peninsula, a coastal and agricultural community about 76 kilometers southwest of Melbourne that has boomed during COVID-19 lockdowns.

Andrew Levy, owner of the rental agency Allocate, says the weekly rent of a four-bedroom vacation home with pool has increased by about 40 percent to about $ 10,000 as renters compete for limited inventory. “It’s very, very difficult to find a long-term lease,” Levy says.

Switch away from apartments

Across the country, there has been a shift toward lower-density properties since the launch of COVID-19 in early 2020, according to analysis by CoreLogic, which monitors real estate markets.

Between March 2020 and September this year, average rents in the Australian capital rose by almost 10 per cent compared to a fall of around 1 per cent in capital apartments, CoreLogic says.

Melbourne’s apartment sector has been the weakest (with rents falling 7 per cent), followed by Sydney (down 1 per cent).

Melbourne and Sydney’s rental markets in the city center and inner cities will continue to struggle, especially in Melbourne, until the number of office workers rises and light international border restrictions attract foreign students and immigrants, market specialists say.

Elishah Lusi, director of Melbourne’s Direct Property Group, says some weekly inner-city rents have fallen by up to 30 percent as landlords struggled to attract and retain tenants.

In Sydney, which is slowly beginning to reopen, there are signs of renewed activity, but it is still far from the pre-pandemic occupancy rate.

“It increases after the last 14 weeks [of lockdown], ”Says Grant Ashley, Director of Sydney Cove Properties. “But there is still some way to go.”

By rethinking

Cautious investors are beginning to return and lockdowns are beginning to ease, though it will likely be slow to return to pre-pandemic conditions, market specialists argue.

Tim Lawless, research director for CoreLogic, says: “When international borders reopen, rental markets are likely to have an immediate and positive impact as migrants, such as students, seek rental housing.”

That is what has happened in London, New York and San Francisco when the danger of COVID-19 eased and rental markets that had been stagnant for almost two years sprang to life again.

New tenants: twins Charlotte (left) and Lucy Abbott, who are moving from home closer to the university. Tash Sørensen

In Melbourne, Lucy Abbott, 18, and her twin sister, Charlotte, believe the risk of pandemic is reduced enough for them to move from their parents’ bayside home to a rental apartment closer to the city and the universities where they study.

“A lot of people have gotten stuck in the same routine during lockdown,” Lucy says. “We want to try something new.”

Peter Hurley, an education policy fellow at Victoria University’s Mitchell Institute, says real estate markets have been most affected by the 50 per cent drop in overseas students living in Australia.

More than $ 14 billion a year (or 36 percent) of the $ 40 billion in non-tuition spending went to rent, especially around central business districts. Hurley is optimistic that students will begin to return – rather than complete their online education – as international border restrictions continue to ease.

Louis Christopher, CEO of SQM Research, adds that regional emigration may slow or decline as long-term city dwellers “seek to return to a wider range of facilities, family and friends.”

Investor demand is rising

Lawless agrees that rising investor demand for apartments is also driving recovery. “Investor demand has historically been skewed towards the sector between medium and high densities, probably due to the lower maintenance and often higher yields associated with higher density housing,” he says.

Investors’ demand for mortgages has risen from a record low of around 23 per cent to more than 30 per cent as interest rates fell to a record low and lenders eased restrictions.

Rising apartment prices have fallen well behind houses, while interest rates have risen, making it more attractive to many investors, according to CoreLogic.

“Both the lower entry point and higher interest rate profile can be an attractive option for investors as they become more active in the housing market,” says Lawless.

The annual trend of renting apartments recently became positive, catching up with the growth rate of rents, albeit from a lower base, CoreLogic analysis shows.

Apartment rents in capitals fell by about 6 percent between April and December last year. Rents in Melbourne’s central business district fell by more than 23 per cent and 19 per cent in Southbank.

Since the beginning of this year, the capital apartments have increased by about 5 percent compared to a 7 percent increase in rents.

Supply voltage

The supply in the inner city is becoming more sparse and rental prices are starting to rise.

“Demand for rents is being diverted back to inner-city areas as other areas become less affordable for renters,” Lawless adds.

Rental housing for residential properties across the country was about 2 percent during September.

Adelaide, Perth, Darwin, Canberra and Hobart were below 1 percent, Brisbane was 1.4 percent and Sydney 2.7 percent.

Melbourne and Sydney’s CBD unemployment were 8.4 per cent and 8.2 per cent respectively.

Leave a Reply

Your email address will not be published. Required fields are marked *