The COVID-19 epidemic has not yet made a significant inroads into the housing market – but the same cannot be said for the rental markets, especially in Sydney and Melbourne, according to the latest CoreLogic study.
Eliza Owen, responsible for residential research at CoreLogic, said that the rental market was already weak before COVID-19 and that the recent economic challenges seemed to have dug a deeper hole.
"While Australia's borders remain closed to tourists and government policies restrict short-term rental agreements, Airbnb rentals are converted into long-term rental offers. The additional offer means rents could go down, "she said.
Registrations increased in Sydney by 36.2% and in Melbourne by 34.1% between March 22 and April 26.
The increase in enrollment has also been influenced by temporary restrictions on migration and the employment situation in these cities.
Read also: The activity of buyers remains strong in certain markets
Owen said rental markets are particularly vulnerable to declining overseas migration, since new migrants generally seek rental accommodation upon arrival in Australia.
"This will have an impact on Inner Melbourne, which has previously maintained stable rental conditions amid a high supply of housing due to the rapid growth in international migration," she said.
Job losses will also play an important role in slowing the rental market. Owen said the inner districts of Sydney and Melbourne have a relatively high proportion of workers exposed to potential job losses as a result of COVID-19.
"Growing job losses see some tenants negotiating lower rents or finding alternative accommodation, such as choosing to return with their parents," said Owen. "A break from the flow of international students and migrants could see more empty properties, while national students are less likely to rent near universities because they access studies from a distance."
Owen said these things could potentially cause downward pressure on purchase values, erosion of rental yields and additional settlement risk for off-plan purchases.
A silver lining, however, could be reserved for potential tenants who still have healthy finances and secure jobs, as they can find cheaper housing options near these cities.
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