- Rental prices have not been so smooth sailing compared to housing
- According to NAB research, there was a general decline in rental prices during 2020
- There is an oversupply of rentals, exacerbated by low international student numbers
As reported on The Property Tribune, the housing boom has been in full swing.
Historically low-interest rates, backed by government support packages such as the HomeBuilder grant program have all contributed to the fastest rise in house prices in 17 years.
However, the story is not so smooth over in the rental market.
Government regulations, together with extensive lockdowns, has limited real estate agents’ flexibility in certain circumstances, according to President of the Real Estate Institute of Australia, Adrian Kelly.
“There was an inability to conduct rent reviews and therefore increase rents,” Kelly noted.
According to NAB research, there was a general decline in rental prices during 2020.
“Unfortunately, we did see rental drops and vacancy rates increase, particularly in and around the universities,” said Leanne Pilkington, President of the Real Estate Institute of New South Wales.
A glut of apartments built in response to pre-pandemic expectations of population growth has only made matters worse, in addition to international border restrictions limiting the return of international university students.
“Particularly in some of the high-density apartment markets, the lack of population growth and overseas migration is going to impact demand for higher density,” observed NAB Head of Behavioural & Industry Economics, Dean Pearson.
Findings from RiskWise Property Research a few weeks ago support this observation, warning about the risks of investing in rental units, including future oversupply and low overseas migration depressing prices for some time to come.
The rental market in NSW particularly has been unpredictable, with vacancy rates moving up and down, month after month.
However, when looking at Australia’s rental market as a whole, Mr Kelly is optimistic.
“There have been some issues in inner-city Melbourne and Sydney, particularly in apartments, but certainly less than five percent of tenants have been impacted due to unemployment. And in most cases, in the smaller regions, it’s less than one percent of tenants. That’s much more manageable than what we were expecting.”
This trend of declining rental prices is not universal, however. For example, according to Domain, Darwin’s rental house and unit prices reached the highest they have been since 2017.
Nationwide rents are set to rise 2.1% over the next 12 months, according to NAB’s Quarterly Australian Residential Property survey. SQM Research data from last week showed that the vacancy rate overall for the nation remains steady at 2.0% (compared to the same time a year ago).