Rental markets across Australia appear to be diverging into two separate paths since the onset of the COVID-19 outbreak — while inner-city regions are experiencing declines, outer-city suburbs are going the opposite direction, according to a study from CoreLogic.

In the study, CoreLogic focused on Brisbane, Sydney, and Melbourne and found that properties closer to these cities are more likely to report declines in rent values.

"There are several distinct factors of the COVID-19 downturn that have made inner-city rental markets particularly susceptible to a decline in rental values. These include the relatively high exposure to overseas migration as a source of housing demand," said Eliza Owen, head of residential research at CoreLogic.

Owen said outer suburbs where employment has been less affected by the pandemic recorded increases in rents. Blue Mountains in Sydney, for instance, reported the highest rental value increases at 3.3%.

However, Owen said the reason for the rental value gains in outer-city suburbs is actually not clear. One explanation could be that these regions have been less exposed to the factors driving declines in demand, such as overseas migration.

"Anecdotal reports assert that a draw card for outer-city suburbs are relatively cheap rents, and low density along with remote working lessening the hurdle of travel times from areas located further from the largest employment nodes," she said.

Since most suburbs that reported gains have cheap rents, Owen said the stimulus packages for low-income households have also added to the rental demand, resulting in an increase.

"The tapering of this fiscal support may lead to a more broad-based decline in rents over the next six months," she said.

The national rental index had been recording consecutive increases in the months leading to March this year. Owen said the outbreak had shifted this trajectory, with closed international borders creating a significant shock to rental demand. The job losses in sectors like hospitality, tourism, and the arts also affected the demand for rental properties.

Of all capital cities, only Adelaide and Perth posted increases in rents over the June quarter. Adelaide's property market has been less susceptible to COVID-19, due to the relative stability of the market, and low participation of investors in the market.

Perth's steady rental market, on the other hand, reflects improved patterns in migration, continued withdrawal of investors since the mining boom, and less exposure to industries heavily affected by the COVID-19 outbreak.