Regional areas have taken a stronger hold of the rental market as Covid-19 sends shock waves through metropolitan vacancies and rental prices.
Capital city rents fell 0.7 per cent in the June quarter compared to a 0.2 per cent increase across regional Australia, according to Corelogic’s quarterly report.
This led to a national drop in rent at 0.5 per cent for the quarter and 0.3 per cent in June.
This adds to data from SQM Research which shows vacancies outside the cities are tightening with the biggest quarterly drops in regional New South Wales, followed by Queensland and Victoria.
Change in rental prices
|Region||Quarter||12 months||Median Rent|
^ Source: CoreLogic 2020 June quarterly rental review
SQM Research’s Louis Christopher said there were strong suggestions regional housing markets were not just stable, they were on the rise.
“This shift isn’t just occurring on the city fringes. It is also happening in areas well outside the cities, ” Christopher said.
“When trolling through our regions, I cannot find one in regional Australia that isn’t recording the same pattern [with a general drop in vacancy] as these ones.”
The exception was Geelong where vacancy increased from 3.0 per cent in December to 4.6 per cent in May and was on the way back down again.
Christopher said he suspected some of the shift to regional areas would be permanent and could lead to other opportunities.
“Obviously there has been an unprecedented and sudden shift towards regional living. No doubt this has been triggered by Covid and the discovery that working remotely is now very achievable for many businesses, especially white collar services, ” Christopher said.
“If there is a more permanent shift to regional living, there will also be employment opportunities, especially in regional centres.
“Australia has long suffered from its economy being anchored to its largest capital cities. Any diversification to the regional centres could very well be a good thing, long-term for this country. ”
Change in rental vacancy
|Region||Dec 2019 Vacancy Rate||June 2020 Vacancy Rate|
^ Source: SQM Research
Corelogic head of research Eliza Owen said the decline in rent values for metropolitan areas over the quarter came at a time when the rental market was already relatively weak.
“Prior to the fall in rent values over the June quarter, growth in rents had seen some momentum building,” Owen said.
“These signs of rebounding rent values came as investor participation in the market was falling from 2017, and subsequently, the rate of new supply additions in rental properties had been falling.”
However the Covid-19 environment shifted this trajectory.
“Closed international borders created a significant shock to rental demand, as historically the majority of new migrants to Australia have been renters,” Owen said.
“Furthermore, job losses in sectors such as hospitality, tourism and the arts, which ABS payroll data estimates has been around 20 per cent, have also impacted demand, because households in these sectors are more likely to rent than in other industries.”