According to CoreLogic, the share of advertised rental housing increased in Sydney and in Melbourne, bucking the downtrend recorded by the rest of capital city markets. The share of advertised rental stock increased to 4.5% in Sydney and to 3.6% in Melbourne.
"An increase in the portion of stock on the market suggests higher vacancies and a looser rental market, which would coincide with falling rent prices," said Eliza Owen, head of residential research at CoreLogic.
Overseas migration is one of the biggest determinants of rental accommodation. Given the closure of borders and travel restrictions, demand for rental homes slowed down. Owen said another reason was Sydney and Melbourne's exposure to international students.
It is also worth considering that New South Wales and Victoria make up the larger share of housing investments. Owen said almost two-thirds of investment loans over the past ten months originated in these two states. Investor activity, she said, contributes substantially to rental supply.
Renovation on the rise
Meanwhile, owner occupiers in many parts of Sydney have taken advantage of the downtime amid the COVID-19 measures to begin their renovation projects.
Matt Halse, local expert at Herron Todd White, said while it is not uncommon to see residential properties being renovated in the inner suburbs of Sydney, there has been a noticeable uptick in projects being commenced amid the COVID-19 restrictions.
"One of the reasons we anticipate minor renovations to be evident in the short term is due to people being locked-up at home and looking for constructive projects to complete around the house which will serve many purposes such as increasing the presentation of their homes and also providing much needed stimulation throughout this lockdown period," he said.
Halse said that even larger renovation projects have started to pick up as they engage builders and tradespeople at a potentially reduced cost.
Renovations in the investment space are also likely to continue, especially for dwellings with older styles.
"It will be imperative that investment properties are presented in the best possible condition. Otherwise tenants will quickly choose a competing property in superior condition or alternatively demand a discounted rental price for any sub-par properties," he said.
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