Rents across Melbourne fell 8.1 per cent in the past year due to high vacancy rates, according to a new report.
Rents for units in parts of Melbourne have nosedived 20 per cent off the back of strict international travel bans.
Some cash-strapped landlords are now being forced to sell up or drop their rent in a bid to dig themselves out of debt, property managers say.
CoreLogic data shows rents for units tumbled in Melbourne by 8.2 per cent in the past year.
Melbourne’s median rent is now $443 per week for all dwelling types.
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Sydney and Melbourne were the only capital cities to record a drop in rents in the past year. Picture: Jeremy Piper
CoreLogic research director Tim Lawless said the fall in some inner-city areas had been more than 20 per cent.
Melbourne recorded the weakest rental growth of all capital cities in the March quarter, with house rents up 1.6 per cent and unit rents unchanged.
Units in Melbourne’s CBD, Southbank, Docklands and Carlton copped the worst price hit during the pandemic, with rents in those suburbs crashing between 21 and 25.4 per cent in the past year.
Mr Lawless said rental markets in Perth and Darwin were conversely booming with “double digit” annual growth, but in Melbourne and Sydney they were sliding.
International travel restrictions were the primary factor that had put a stranglehold on rents in those markets, he said.
Sydney unit rents dropped 4.9 per cent in the past year, according to the data.
“The annual decline in rents across Australia’s two largest cities is attributable to falling rents in the unit sector, where closed international borders have created a demand shock in a market that was already challenged by high supply,” Mr Lawless said.
“Some inner-city precincts in Melbourne have seen unit rents fall by more than 20 per cent over the past 12 months.”
Lucas Real Estate property manager Emma Racky said vacancy rates in Docklands had skyrocketed 22.4 per cent since the pandemic hit.
This had lead to a number of “tough conversations” with landlords about dropping their rent to draw in new tenants, she said.
But not all owners were in a position to lower their rent or wait until a property was filled.
An apartment that leased for $480 per week prior to COVID-19 was now “lucky” to earn $300, she said.
“We are leasing properties, but it is taking some time,” Ms Racky said.
“The supply outweighed demand 10 to one.”
CoreLogic research director Tim Lawless said travel restrictions were primarily to blame for weak unit rental markets in Melbourne and Sydney.
Barry Plant property manager Sicily Cheng said lowering rents was an option, but it was a decision that could only ultimately be made by the landlord.
Ms Racky said demand for rental properties was picking up, but she predicted it would take at least until the end of the year to reach pre-pandemic levels.
“We have noticed there is a lot more tenant activity, which is good, but it’s not enough to increase that rent,” Ms Racky said.
Hodges agent Alex Kennedy said the worst of the COVID-19 rental downturn appeared to be over.
Melbourne’s highest-yielding unit rental market last year was Carlton, according to the report.
Units in the suburb earned a median weekly rent of $378 and a gross rental yield of 5.1 per cent.
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Top 5 Melbourne suburbs where unit rents dropped the most annually:
Melbourne CBD: 25.4% decrease
Southbank: 23.6% decrease
Docklands: 21.9% decrease
Carlton: 21.2% decrease
North Melbourne: 17.8% decrease
Source: CoreLogic