The rental market is remaining steady nationally, but parts of Sydney and Melbourne are still riding out the impacts of COVID-19 and the recession.

Australia saw a marginal rise in the vacancy rate from 2% in September 2020 to 2.1% in October 2020, according to SQM Research.

More than 74,000 rental properties were empty across the country.

However, vacancies in all capital cities, bar Sydney and Melbourne, saw no change, despite the two cities making progress with their economic recovery from the pandemic.

The vacancy in Sydney rose by 10 basis points to 3.6%, while in Melbourne, vacancy was up by 60 basis points to 4.4%. This was the highest recorded vacancy in Melbourne by SQM since January 2005.

The Victoria capital understandably has the highest vacancy across Australia, due to its extended stage four lockdown which began in August.

The vacancy rate in Docklands, which has been well known for its apartment boom, has skyrocketed to a staggering 18.8%, up from just 4.4% in March when the pandemic hit.

Docklands residential vacancy rates

Source: SQM Research

The latest vacancy rate has eclipsed the suburb’s highest recorded vacancy of 10.1% in December 2011.

Unit rents are at its lowest point since 2010 of $431 per week, according to SQM Research, nosediving by about 33% since March this year.

Meanwhile, the Melbourne CBD is seeing a surplus in rental stock of 10.6%.

Weekly unit rents are sitting at $418 – back in March, this was $600. Over the year to November 2020, unit rents have plummeted by about 28 per cent.

Weekly house rents have seen more of an improvement at $495 in November, compared with $437 in September, though this is still well below the $658 seen in March.

What the property market might look like after a recovery

SQM Research’s Louis Christopher expects the market trend of higher vacancy in city markets, coupled with tighter vacancy in regional locations, will reverse as Australia rides out COVID-19.

“While regional locations are still recording near zero rental vacancies, I believe the ongoing phenomenon, which started on the outset of COVID-19 lockdowns, will in part reverse out once coronavirus is behind us,” he said.

“But we are not there yet and there is also a large possibility that there will only be a part reversal as I believe many have used Coronavirus as a catalyst for a longer-term lifestyle change.”

Mr Christopher added that bargains will be around for anyone looking for an inner city rental, as rents continue to fall closer to the CBD.

Domain also expects Melbourne's vacancy to tighten in the coming months when inspections and rental processes go back to normal, with many restrictions now lifted. However, they also warned of a slow grind economic recovery and weaker population growth, which could put a lid on rental demand.