With the outbreak of COVID-19, Melbourne’s rental market saw a huge hit to rents, as landlords were forced to give their tenants rental reductions to combat the financial stress of the pandemic, with house prices in Inner Melbourne reduced by $40 per week, and units $35 per week over the June quarter, giving units the first annual fall in 15 years.
However, house vacancies haven’t seen the dramatic falls that were expected. Residential house rental vacancy rates in July 2020 in Melbourne was only 1.8% compared with 1.6% in July 2019, where units definitely felt the crunch with 5.2% vacant in July 2020, compared with 1.8% in July 2019. This would be due to the lack of immigration and international students being allowed to enter the country, coupled with young Melbournians moving back with mum and dad with this lack of certainty in the global economy and the reduction of social interaction, and AirBNB short term rentals converting to long term rentals to cover investors’ mortgage repayments.
While dollar figures are indicative of a price cut, the reality is, that rental prices haven’t been given their annual increase as the government put a freeze on any rental increases through the pandemic, so the average Melbourne house rental is $470 a week, up 4.7% on July 2019, and units remain steady on $430 per week.
However, there is a concern for the number of properties that are in rent arrears. As the government put a moratorium on rental evictions until March 28, 2021, rental arrears are four times higher than it normally would be, more than the usual Christmas time, creating unrest for landlords.
Given the comeback of the market after the Stage 3 restrictions from March-June 2020 were removed, we are likely to see tenants more confident in renting again, once the lockdown is eased or lifted. The question will be, will it be at the same pace as previously, or if consumer sentiment will take longer to make an impact, as lockdown restrictions have been tougher this time? Most consumers want ‘change,’ it’s what form that ‘change’ comes in that will improve the rental market beyond 2020.