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Lifestyle demand sees rental prices surge

By KATRINA CREER

A surge in Aussies moving to lifestyle destinations is causing a hike in rents, with it now costing more to lease a unit in Brisbane than in Melbourne.

Demand for coastal living has also seen price increases on Queensland’s Sunshine Coast and the Gold Coast, while apartments on the NSW Central Coast and Northern Beaches are fetching a premium.

The Domain Rental Report for the December quarter has revealed the impact the COVID-19 pandemic is having on the market with the cost of leasing a house also rising as tenants look for space amid lockdowns.

“House rents are now at a record high following the steepest annual gain in just over decade,” said Domain Senior Research Analyst, Dr Nicola Powell.

“Most capital cities have the highest asking rent since Domain records commenced in 2004, apart from Darwin, Perth and Hobart.”

Canberra, which has been less impacted by the pandemic, is now the most expensive capital city to lease a property in Australia.

Strong competition for rental properties has resulted in tenants forking out an extra $20 per week to let a house at $600 per week and $15 for a unit at $495 per week.

“This is the first time in a decade Canberra has the highest unit rent of all capitals,” said Dr Powell.

“The lure of Canberra is becoming increasingly obvious, with low COVID-19 cases throughout the pandemic, employment opportunities and lifestyle on offer.” 

Melbourne’s elevated vacancy rate is directly associated with the secondary lockdowns and state border restrictions, Dr Powell noted.

Rental demand has been severely reduced as international border closures curtail overseas migration, as well as a drop in tourism and changes to personal finances.

Its median house rents remained steady at $440 per week, while unit rental prices dropped three per cent to a four-year-low of $388.

For the first time in five years, it is now third most affordable city to lease an apartment, after Adelaide and Perth.

“A marked changed considering Melbourne was the third most ‘expensive’ city to rent a unit back in March,” Dr Powell said.

“Inner-city apartments have been hardest hit with rents at a seven-year low, followed by the inner-east and inner-south hitting a four-year low.”

In Sydney, house rents are at a price high, jumping $10 a week during the December quarter to a median of $550. It has been supported by stronger prices in outer Sydney with properties on the Central Coast and Blue Mountains also achieving the highest rents on record.

Unit rents tumbled $25 per week to 2013 prices attracting a median of $470 – the steepest quarterly annual fall on record. Those in the CBD, eastern suburbs, inner-west and lower north shore have been hardest hit.

The upside is affordability in some pockets – particularly in the city and east – with house and unit prices dropping $120 and $100 respectively in the past year.

“Annually unit rents have been falling since mid-2018 but this trend has been accelerated by changes as a result of COVID-19,” Dr Powell said.

“The pandemic-induced collapse to overseas migration and foreign student demand has reduced rental demand.”

She expects unit vacancy rates in Sydney will continue to rise while tenants hoping to move to a house will find fewer available.

Similarly, lifestyle demand is pushing up the cost in Brisbane, with tenants having to find an extra $15 per week to let a house or unit.

Two consecutive quarterly gains for house rentals resulted in the capital city recording its sharpest annual increase to a median of $425 per week. Unit rents are also up by 1.3 per cent to a median of $400 per week.

While now more expensive than Melbourne, the demand in the inner-city has been weakened due a lack of tourists and migrants.

Dr Powell believes Brisbane’s vacancy rate is likely to tighten further in coming months due to rising interest from southern states and a flow of residents from regional Queensland into the suburbs.

“A rebounding jobs market and lifestyle locations will continue to see accelerated demand, factors that are likely to drive significant and those working from home opt to relocate,” she said.

Darwin’s containment of COVID-19 also boosted its income, with house rents jumping $60 per week during the quarter to $550 per week and units up $30 to $420 per week.

Those looking for affordability should be heading to Adelaide. House and unit rents reached record highs in 2020, however, it is still the cheapest capital to lease a property in Australia. 

House rents increased $5 during to December quarter to a median $410; while apartments remained steady at $340 per week.

If the borders remain open, Dr Powell believes it could benefit from a resurgence in domestic travel which will drive demand for short-term leases and could tighten long-term rental market further.

Perth’s rental recovery has continued with the capital enjoying its highest asking rents in five years. House are costing $25 more per week to lease at $420, while apartments are up $10 to $350 per week.

Dr Powell said tenants are now operating in a ‘landlord’s market’ with the choice of vacant rentals plummeting 63 per cent compared to last year.

Hobart’s rental market remains the tightest of all the capital cities with the median rent increasing 2.2 per cent to a median weekly rent of $460. The unit market held steady at $400 per week.

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