According to CoreLogic's latest quarterly rental report, Australian rental markets are expected to ease further as the impact of the COVID-19 outbreak continues to weigh on demand for housing.
The value of rents fell 0.5% in the June quarter, the largest drop since September 2018. Capital cities have suffered the brunt of the economic shocks resulting from the COVID-19 epidemic . In fact, rents in state capitals fell 0.7% in the quarter, compared to a 0.2% increase in rents in regional markets.
Eliza Owen, head of research at CoreLogic, said that prior to the epidemic, the National Rent Index had recorded back-to-back increases until March of this year.
"However, the COVID-19 environment has changed that trajectory. The closure of international borders has created a significant shock to rental demand, as historically the majority of new migrants to Australia have been renters" , she said.
Job losses in industries like hospitality, tourism, and the arts have also affected demand for rental properties.
The decline in rents is expected to continue in the coming months, the report says.
Of all the capitals, only Adelaide and Perth were able to record rent increases during the quarter. Adelaide's real estate market has been less susceptible to COVID-19, due to the relative stability of the market and low investor participation in the market.
Perth's stable rental market, by contrast, reflects improving migration patterns, continued withdrawal of investors since the mining boom, and less exposure to industries heavily affected by the COVID-19 epidemic.
With property values ??up 7.8% and rents down 0.7% year-on-year through June, the national rental yield fell to 3.73%, which is only two basis points from the record low reached in August 2017.
Rental yields per unit led the decline. Rents in the housing segment fell by 1.4% against a 0.3% drop in values ??over the quarter. Currently, unit returns are 4%, the lowest on record.
While conditions in the housing segment are quite similar, rental yields on housing have started to stabilize, with values ??falling faster than rents. During the quarter, home yields rose 3.6%.
The table below shows the main rental and performance figures for houses and units during the June quarter:
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