The onset of COVID 19 may be creating a two-speed rental market, with inner city rents declining faster than those in the outer suburbs, says CoreLogic’s head of research Eliza Owen.
“The closer a region is to the CBD, the more likely it is that rent values have fallen,” says CoreLogic’s head of research in Australia, Eliza Owen.
CoreLogic analysed rent values across 125 markets in Brisbane, Sydney and Melbourne, comparing the median property distance to the CBD with the change in total rental market values from the end of March to the end of August.
For regions where the typical property is less than 10 kilometres from the CBD, the average decline in house rents was 2.3 per cent, and 3.6 per cent across units.
For rental markets 10 kilometres or further from the CBD, house rents had increased 0.1 per cent, while unit values declined a relatively mild 0 4 per cent.
“When examining the capital cities and housing stock separately, the strongest relationship existed between rent changes in Sydney units and distance to the CBD,” Owen explains, adding “the closer a property was to the CBD, the more likely, and steep, rental declines have been through the pandemic”.
Why have inner city markets been more affected?
Owen says the decrease in overseas migration has made inner city rental markets particularly susceptible, because the majority of new migrants are renters.
Of the 125 rental markets analysed, 63 regions posted increases in housing rents, and 35 in unit rents.
Rental increases were most common “where employment has been less affected by the pandemic, and social distancing measures have eased,” Owen explains.
The highest rental value increases were across Blue Mountains houses, rising 3.3 per cent.
Owen says one of the reasons for rental value increases in outer suburban areas may be that these markets are less exposed to factors driving declines in demand, such as overseas migration.
“Anecdotal reports assert that a draw card for outer city suburbs are relatively cheap rents, and low density along with remote working lessening the hurdle of travel times from areas located further from the largest employment nodes. This may have increased rental prices through higher demand.”
“It may also be the case that added stimulus to low income households have added to rental demand in areas where rents are usually cheaper. The tapering of this fiscal support may lead to a more broad-based decline in rents over the next 6 months,” Owen concludes.