Rental vacancies surge as CBDs empty

Fewer international students and corporate renters, plus a switch from Airbnb, are good news for tenants but a disaster for landlords.

Apartments in Melbourne’s Southbank.

Residential rental vacancies in east coast CBD markets have surged amid a slump in corporate clients, a fall in international students and an influx of former Airbnb properties.

Sydney’s rental availability more than doubled from March to April to reach the highest level on record, ballooning to 13.8 per cent last month, according to property data house SQM Research. Brisbane followed a similar trend, with CBD vacancies up from 5.7 per cent to 11.3 per cent.

SQM Research managing director Louis Christopher said the data highlights the mass exodus of renters from central city markets due to the fallout from coronavirus pandemic.

“This is one of the largest one-month rises ever recorded on our vacancy rates series,” Mr Christopher said.

“This might be attributed to the significant loss in employment in our CBDs plus the drop off in international students. We are well aware of a surge in short-term accommodation now being advertised for long-term leasing.”

Melbourne’s CBD market experienced a 2 per cent rise in vacancy rates month-on-month to 7.6 per cent through April, but the popular Southbank precinct hit a vacancy level of 13 per cent. The number of rentals also doubled in the CBDs in Adelaide (up to 6.6 per cent), Canberra (up to 4.6 per cent) and Hobart (up to 2.5 per cent).

Director of Sydney Cove Property Grant Ashby said the disappearance of fly-in and contract workers from the corporate sector, combined with the flood of Airbnb properties moving from short to long-term rentals, and reduced demand from local and overseas students, had caused a slump in demand for one-bedroom apartments. Rents had already fallen around 20 per cent.

Mr Ashby said the number of properties on the market within Sydney’s central the 2000 postcode, which spans from Haymarket to Walsh Bay, has climbed from the average of 430 dwellings to more than 1400 in the past six weeks.

“The corporate movement of working from home and pushing people away from the office has also pushed people back to their original homes as well,” Mr Ashby said.

“The market has a lot of people who work a few days here and a few in Melbourne or are here on a contract basis. All those people have been pushed out and those properties have been returned to the market. Also, students have not come back in droves and taken the lower end properties.”

More broadly, the number of rentals on offer through April grew in all capital cities bar Darwin, with the national vacancy rate up 2 per cent in March to 2.6 per cent last month. The most significant growth was in greater Sydney (up to 3.9 per cent), while greater Melbourne hit 2.8 per cent last month.

Mr Christopher warned the impact on rental prices – which some have flagged may be greater than on the selling market – will worsen if the economic impact of the virus drags on.

“If it is sustained throughout the course of the year, then we can expect far deeper falls in rents, which will be good news for tenants but a disaster for landlords,” Mr Christopher said.

“There will also be economic consequences with further sharp falls in building approvals likely; thereby risking a major depression in our residential construction sector as well as the rather obvious risks for housing prices.”