Rents on the rebound

RENTS are recovering from their pandemic lows with each inner-city precinct likely to benefit from increased demand due to open borders and fewer restrictions.

Australia’s capital city unit rents fell 5.7 per cent between April and December 2020, but have been rising through 2021, CoreLogic’s latest research shows.

Capital city house rents are up 10.1 per cent since March last year, while unit rents remain 0.3 per cent below preCovid levels, with inner city unit rents generally down the most.

Unit precincts across the inner city areas of some capital cities recorded a much weaker performance through the Covid period to date.

Prior to Covid-19, Melbourne was attracting the largest number of net overseas migrants, with a large portion of these students and visitors having gravitated towards inner city rentals.

The largest falls in rents during that period came within the Melbourne unit market, but rents are now 2.4 per cent higher over the three months ending October and 1.1 per cent higher over the 12-month period.

In Sydney, renting an inner city unit is about 3.1 per cent cheaper than it was in March last year.

While rental rates are rising at the fastest pace since 2008, a gap has opened up between the rate of growth in house rents compared with unit rents.

Overall, unit rents have risen at a slower pace than house rents since the onset of Covid in March last year.

The weaker trend in unit rents follows a similar trend in housing values.

House values are up 24.2 per cent over the year across the combined capitals, rising at more than double the annual pace of unit values, which are up 11.8 per cent over the year.

The softer performance of the unit sector was attributed to demand and supply side factors.

On the demand side, there has been a preference shift towards lower-density housing options during the pandemic and the abrupt stalling in overseas migration has interrupted tenancy demand around key unit precincts.

“However, we are starting to see a reversal in that trend as rental listings fall below preCovid levels in some inner city areas and rents are once again on the rise as tenants take advantage of the renewed affordability of inner city renting,” CoreLogic research director Tim Lawless said.

“Rental demand for inner city tenancies is likely to increase further as the CBDs and inner suburbs become more vibrant as restrictions ease and workers gradually return to work.

“Once international borders open more fully, it’s likely demand for inner city unit accommodation will rise more substantially, especially as foreign students and international visitor numbers start to lift.”

But he said the timing for a “normalisation” of overseas migration rates remained highly uncertain. He said this would depend largely on government policy and appetite for travelling abroad.