Melbourne Unit Rents

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Melbourne's inner city unit market recorded the largest falls across Australia this year down -7.6 per cent over 2020, according to CoreLogic’s Rental Review for the December 2020 quarter.

Across the individual property types nationally, houses substantially outperformed units over the year, with house rents rising by 3.9% annually against a 3% reduction in unit rents.. Unit rents were down -4.6% across the combined capital city unit market.

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Despite Melbourne recording the largest falls in unit rental rates over the year, Melbourne remains the third most expensive unit market of the capital cities behind Sydney and Canberra. 

Melbourne came in as the third most affordable capital city to rent a house.

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The area's hit hardest in Melbourne were the City and &amp; Inner East down -13.7 per cent and  -5.3 per cent. Following behind those loss leaders were the North West and Inner South, -3 per cent and -2.9 per cent respectively.

Some regions did see improvement across the wider region including with the Mornington Peninsula up 5 per cent and the Outer East up 0.6 per cent, the only two regions that didn't see a loss in values.

Rental conditions in regional markets have been outperforming capital cities with unit markets recording weak conditions across the largest capital cities.

December 2020 saw Australia’s dwelling market record the largest monthly increase in rental rates since 2010, up 0.6 per cent over the month. The 10 year record can be attributed to growth across the house market which saw a 0.9 per cent rise in rental rates over the month, more than offsetting a -0.1 per cent fall in unit rents.

Across the broad regions, regional markets were the standout performer with both house and unit rents up 1.1 per cent in December, taking house rents 2.9 per cent higher over the final quarter of 2020 and unit rents 2.6 per cent higher.

Unit rental rates across the capital cities fell -0.3 per cent over the month to be down -1.6 per cent over the December quarter. Despite the diverse performance over the year, national rents rose by 1.9 per cent annually in 2020, which was the largest annual increase across the dwelling market since mid-2018. 
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Melbourne's inner city unit market recorded the largest falls across Australia this year down -7.6 per cent over 2020

urban.com.au

Melbourne unit rents stalled while regional markets soar

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Rental conditions across the Melbourne and Sydney unit markets have been characterised as having weak demand and high supply. It is driving a sharp drop in rents. Demand for inner city unit rentals has been significantly impacted by stalled overseas migration, especially from lower overseas student numbers, according to the latest data from CoreLogic.

Weak demand for inner city unit rentals has been exacerbated by a recent history of high rise apartment construction in Melbourne and Sydney, with the pipeline of new units that are still under construction remaining well above the decade average. Melbourne unit rents are down -7.6% over the calendar year and Sydney unit rents are down -5.7%.

The CoreLogic report posited that Weak rental conditions across the unit sector are likely to persist until overseas migration starts to ramp up and the higher levels of supply are absorbed.

Rental yields have been under some mild downwards pressure through the COVID period, with the gross yield across the combined capitals region reducing from 3.51% at the end of 2019 to 3.42% in December 2020, while yields across the combined regional areas have reduced from 5.03% last year to 4.83% this year. Despite the lower yield profile, with interest rates likely to remain at record lows for some time yet, the opportunity for positive cash flow properties is becoming more prevalent.

Opportunities for positive cash flow properties along with the potential for capital gains is likely to see investment activity consistently lift through 2021, CoreLogic noted.

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/jan_4_rents_1.jpg" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="327" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/jan_4_rents_1.jpg?itok=RQIFTQP6" width="580"></a></figure>However rental conditions have diverged substantially in 2020 from both a geographical perspective and across the housing types. From a geographical perspective, the annual change in rents has been strong in Perth and Darwin where house rents are up around 10% in both cities and unit rents are 6.8% higher in Perth and 7.6% higher in Darwin.

CoreLogic Research Director Tim Lawless attributes the strength in Perth and Darwin rentals to both strong demand and a recent history of minimal supply additions.

“Both Perth and Darwin have recorded below average levels of investor activity since housing market conditions started to cool in mid-2014 which has led to a shortage of rental stock. More recently, with stronger interstate migration driving housing demand, rental rates have been under substantial upwards pressure as demand for rentals outweighs supply,” he said.

Although rents are surging higher in Perth and Darwin, the longer term trend highlights the weak rental conditions that persisted prior to the recent upswing. Perth rents remain -10.4% lower than the previous peak in May 2013 and Darwin rents remain almost -20% below their 2014 peak.
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Melbourne unit rents are down -7.6% over the 2020 calendar year and Sydney unit rents are down -5.7%

Melbourne Unit Rents

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