An oversupply of rental properties in inner Melbourne and Sydney has led to a significant decrease in rent prices, according to the latest ANZ CoreLogic Housing Affordability report. The report indicates that between March and June, advertised rental stock increased by nearly 60% in these areas.
The rise in available properties is attributed to loss of income and travel restrictions, which have contributed to the excess stock levels. Inner Melbourne saw a 57% increase in advertised rental properties, while Sydney's city and inner south experienced a 53% jump. In contrast, all other capital cities recorded a decline in total rental listings.
ANZ Economist Felicity Emmett explained that the reduced demand for rentals in these areas is linked to their "service economies," where many workers affected by COVID-19 are renters. "Nearly 40 per cent of people who work in the accommodation and food services sectors rent," Ms. Emmett stated. She added that during the weeks ending March 14 and June 27, "21% of hospitality workers lost their jobs, compared to an average of 6% across all industries."
The lack of overseas migration has also played a role in decreasing demand since about 80% of newly arrived migrants rent. This decline impacts regions popular with migrants, such as inner city and south-eastern Melbourne, as well as inner south-west Sydney.
The oversupply has resulted in rental values dropping by up to 7% in suburbs like Haymarket and Barangaroo in Sydney and Southbank in Melbourne.
CoreLogic’s Head of Research, Eliza Owen, noted that while tenants might benefit from reduced competition for rental properties through potential rent reductions, landlords should not be overly concerned. "The oversupply of rental stock since March has been largely confined to inner city areas in Melbourne and Sydney," Ms. Owen said.
She pointed out that there are still investment opportunities where rental markets have tightened and values have risen, particularly in certain suburbs across Perth and Hobart. These areas may see Airbnb stock return to the short-term rental market as inter-state travel resumes.