Rental Momentum Eases Over March as Virus Fears Set In

Rental markets across the country could soon see prices weaken as a result of the coronavirus lockdown, despite rents increasing over the month of March.

Rent values increased 0.3 per cent nationally over the month of March, but were up just 1.2 per cent for the quarter and 1.4 per over the past 12 months, according to Corelogic.

Despite signs of weakening conditions in the month of March, the overall quarter results show rental increases in all capital city regions, led by a 1.7 per cent increase across the Perth.

Sydney remains the most expensive rental market, with a current median rental value of $577 per week.

In Melbourne, rental growth in the March quarter was its weakest in six years with rents rising by 0.3 per cent over the month up to $444, with a quarterly increase of 1.1percent and 3.5 per cent lift over the past year.

Rental growth across Brisbane was flat over the month, with house rents remaining unchanged and unit rents increasing marginally.

March 2020 quarterly rental review

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The first quarter of the year, traditionally a time of stronger rental growth due to tenancy renewals, has yet to reflect the full impacts of the coronavirus crisis, with social distancing regulations beginning to weigh on the economy from late-March.

Corelogic noted that the economic “hibernation” enforced by the government to halt the spread of the virus would continue to impact the housing markets heavily for the next 12 months at least, particularly rentals, as job losses, stand-downs and subsequent drops in income mount.

“A deceleration in the growth of rents, as well as a decline in some areas, signals that this growth momentum is facing disruption,” Corelogic head of research Eliza Owen said.

In a bid to support renters, the national cabinet banned residential evictions for six months from 30 March. However, many officials believe lockdowns could remain in place for “at least six months”, despite the numbers of new infections stabilising.

Detail around rent relief schemes still remain unclear as each state takes its own approach.

Property economists are also closely watching the boarders, with the rental markets traditionally being heavily underpinned by steady overseas migration, especially when there are constraints on new commencements.

“It has been documented that overseas migrants typically initially rent when they first arrive from overseas,” Owen said.

“However it is worth noting that overseas migration rates had started to slow a little by September 2019.”

The gross yield on residential property continued to be squeezed amid the property market recovery through to March.

Rental yields remained unchanged at 3.7 per cent with Hobart at 5 per cent, struggling Darwin at 5.8 per cent and regional markets 4.9 per cent offering the highest returns for investors.

Corelogic noted that since June 2019, property values increased 8.6 per cent, against a 1.2 per cent increase in the national rent index over the same period.

Adelaide and Canberra were the only capital city markets to record higher yields over the March quarter relative to the previous three month period.

Rental yields in Adelaide rose 8 basis points, while Canberra had a relatively strong rental yield increase of 0.15 per cent, helped by the high-number of government and administrative support jobs.

While gross rental yields increased slightly in Sydney over the March quarter, they remain close to historic lows in the nation's biggest housing markets and in most capital cities.