Why Sydney and Melbourne rents will continue to fall

Louis Christopher, managing director of SQM Research, has released the below chart on Twitter previewing his upcoming weekly rental listings index:

As shown above, rental listings in Melbourne have soared to levels not seen for at least a decade.

Sydney rental listings have retraced slightly, but remain at very high levels:

As shown this month by the RBA, both cities have already experienced soaring rental vacancy rates:

And rents have already fallen, with the apartment segment faring especially badly:

The construction pipeline across Sydney and Melbourne also remains strong despite forecast negative net overseas migration over 2021 and 2022:

It takes time for supply to adjust in response to weaker demand from lower population growth. While contacts in the Bank’s liaison program have reported that low rents and higher rental vacancy rates are already contributing to weak investor demand for off-the-plan apartments in Melbourne and Sydney, these projects are yet to enter the pipeline of construction activity. Over the medium term, the pipeline of apartments due to be completed, combined with weaker population growth, is expected to see the national vacancy rate increase by around 1 percentage point by 2021…

This spells falling rents across Sydney and Melbourne, with the oversupplied apartment segment to bear the brunt of rental declines.