The apartment market has arguably been the most impacted residential sector by the Covid-19 pandemic throughout 2020. As one of the more popular and suitable forms of accommodation for young people and couples leaving home for the first time, the apartment rental market certainly suffered when many young adults boomeranged back home as their casual or part time jobs in the retail and hospitality industry were lost during various stages of the Covid-19 pandemic. Those students living away from home to attend university also opted to return home when tertiary education providers moved to online learning models, whilst international border closures saw the evaporation of international student rental demand. Adding to the highly fluid environment, many landlords removed their properties from short stay platforms like air BnB and instead pursued the security of longer-term tenants in response to State and International border closures. If ever there was a period of time where a confluence of circumstances emerged so rapidly for the apartment market in recent times, the author is unaware.

As always, the impact of some of these challenges has been more significant on certain locations than others. City suburbs that were highly exposed to international students were some of the worst hit, whilst many regional locations did not experience the same level of adversity. Some student accommodation operators were able to counter some of their lost demand by temporarily converting themselves into Covid-19 quarantine facilities, whilst private landlords targeting the student accommodation sector were obviously not as fortunate.

Despite the challenges that have faced the apartment rental market, Queensland’s market as a whole has proven quite resilient. Across all 108 relevant postcodes in Queensland, median weekly rental rates for two-bedroom apartments remained quite firm between September 2019 and September 2020 and managed to increase, albeit only slightly by an average of just 1% or $4 per week. For context, it’s worth noting that between September 2018 and September 2019, in a market unaffected by the same type of challenges, price growth trends were not hugely different. Across this timeframe, median weekly rental rates for two-bedroom apartments increased by an average of only 3% or $9 per week across all relevant postcodes in Queensland.

Whilst many locations have proven vulnerable to the challenges presented by Covid-19, it’s important to also acknowledge those destinations that have outperformed the broader market trend. The table below provides a summary of Queensland’s top three postcodes in terms of rental price growth for two-bedroom apartments between September 2019 and September 2020. Two-bedroom layouts have been selected for inclusion as they account for circa 55% of all new bonds lodged for rental apartments in the last quarter, well ahead of one-bedroom apartments at 30% and three-bedroom apartments at 15%. As was the methodology for house and townhouse rents, only postcodes that recorded a minimum of 20 new bonds in the September quarter of 2020 were included in the following analysis in order to avoid results that were susceptible to skewness.

The top three apartment rental markets features one regional postcode that also ranked in the top three for house rents in 4680 and two, neighbouring, SEQ based postcodes that did not feature in our earlier examination of the top house and townhouse rental markets in 4224 and 4223. With both of these postcodes neighbouring the 4221 postcode, which led the State in townhouse rental growth, it’s suffice to say that the stretch of sand that runs from Tallebudgera Creek to Tugun at the southern end of the Gold Coast has played host to Queensland’s strongest medium to high density rental market in 2020.

4224 Postcode

The 4224 postcode is relatively small in size and hosts a single beachside suburb of Tugun which is bordered by the Gold Coast Airport to the south and Currumbin to the north. As demonstrated in the table above, median weekly rental rates for Tugun have outperformed all other Queensland postcodes in the past year, increasing by 15.2% from $413 in September 2019 to $475 in September 2020. Apartment rental price growth in Tugun has not been influenced by any notable surge in local apartment development activity, but has instead been affected by development activity in neighbouring suburbs; combined with a current vacancy rate of just 0.3% and, interestingly, a reduction in air travel in and out of the Gold Coast Airport. It has also benefitted from stability in the health care sector, which is the suburbs top industry of employment with many residents employed within Tugun’s own, John Flynn Private Hospital.

The 4224 postcode is located quite close to the 4221 postcode, separated only by Currumbin that sits in between the two. As discussed in last week’s newsletter, the 4221 postcode, or more particularly its host suburb of Palm Beach, has experienced rapid change in recent years through a surge in private development activity and public infrastructure investment. Local market sentiment suggests that price growth, incredibly tight vacancy rates and a changing demographic profile in Palm Beach has created the circumstances for some of its former or prospective residents to look further south into Tugun. In doing so, these people are provided a similar coastal lifestyle in a beachside suburb that is yet to have experienced the same level of redevelopment activity, particularly in the apartment market. In somewhat similar fashion to what has occurred between Sunshine and Sunrise Beach on the Sunshine Coast, Tugun is becoming an increasingly popular alternative to Palm Beach.

One of the more unique ways in which Coivd-19 has had a positive impact on local rental rates is through a significant reduction in the number of planes flying in and out of Gold Coast Airport. Tugun borders the northern end of the runway for the Gold Coast Airport and its property market has always been impacted by the noise and disruption caused by the high volume of planes that make their final descent over Tugun. Whilst most accept that the current scenario will be short-lived, the short-term nature of rental agreements has allowed some landlords to benefit from the ensuing, temporary lifestyle improvement afforded to their tenants. Looking further ahead though, rental price growth in Tugun will be further supported by a $1 Billion Upgrade to the M1 between Tugun and Varsity Lakes and the future arrival of the Gold Coast Light Rail in years to come which will ultimately provide residents with a direct public transport link to most major social and employment hubs on the Gold Coast.

4680 Postcode

Featuring for the second time in this three-part series, the 4680 postcode has ranked as the second best performing apartment rental market in the past year. Home to one of Queensland’s largest industrial service hubs in Gladstone, the 4680 postcode has seen its median weekly rental rate for two-bedroom apartments increase by 14.3% between September 2019 and September 2020, from $175 to $200.

Much of the sentiment discussed in relation to Gladstone in one of our previous articles on Queensland’s top house rental markets should also be applied to the growth recorded in the local apartment rental market. Stability in the operation of most of Queensland’s largest resource projects throughout the Covid-19 pandemic has continued to support local businesses in Gladstone, where the total volume of exports leaving Gladstone Port remained at near record highs throughout the 2019-20 financial year. Combining this with a local property market that has finally overcome the hangover of an oversupply of investment housing during the early 2010’s, minimal to no exposure to the student accommodation or short stay markets and Gladstone has been far less vulnerable to the negative impacts of Covid-19 thus far. The author does acknowledge though that at the time of writing, circa $700 million worth of coal was being parked in ships off the coast of China which could impact Gladstone’s short to medium term outlook.

However, and as previously mentioned in regards to the performance of Gladstone’s house rental market, whilst the recent growth in apartment rental rates should be celebrated, it must be taken into context as being a reflection of a market that is returning to growth from quite a low base, after years of declining rental values (between 2012 to 2017). This point is best highlighted by comparing the current rental rates with those achieved back in September 2012, when the median weekly rental rate for a two-bedroom apartment was twice as high, at $400 per week.

4223 Postcode

Another southern Gold Coast location, the 4223 postcode is situated between Palm Beach and Elanora and includes both Currumbin and Currumbin Valley, with the former being most relevant in terms of apartment accommodation. Between September 2019 and September 2020, the 4223 postcode has experienced a 14% increase in median weekly two-bedroom apartment rents, which have grown from $430 to $490 per week. The story behind this growth in rental rates for the 4223 postcode is very similar to what has been discussed in relation to both the 4221 and the 4224 postcode in terms of recent, current and future infrastructure growth and also by resilient key industries of employment.

Notably, the 4223 postcode entered into Covid-19 with a tight rental vacancy rate of just 0.9% in February, which has firmed further to 0.6% in September, after temporarily spiking at 2.2% in April as some landlords took their properties out of the short stay market and sought longer term tenants. Leading into Covid-19 with a tight vacancy ensured the 4223 postcode was able to withstand the temporary spike in vacancies, whilst the region’s close ties to resilient industries also played their role. The Health Care and Education industries are Currumbin’s two largest industries of employment and have proven to be two of the best performing sectors throughout Covid-19, with primary and secondary schooling systems able to adapt without major job cuts whilst most of the public health care sector has continued to function, albeit under more strict conditions relating to employee and patient hygiene.

Although it has been mentioned on numerous occasions, it’s important to note that the 4223 postcode has also benefitted from growth and gentrification in the neighbouring suburb of Palm Beach and is set to be another key beneficiary of both the current $1 Billion upgrade to the M1 between Varsity Lakes and Tugun and the future extension of the Gold Coast Light Rail. Furthermore, whilst the author does not believe the hype around the supposed trend of people flocking to coastal regions with plans to enhance their daily lifestyle by spending more time teleworking, local agents suggest that there has been some truth to this rumor in parts of both the 4223 and the 4221 postcode. However, the attraction to this particular region for these types of tenants is underpinned by proximity to the M1 to provide access to other key employment hubs, with Palm Beach and Currumbin being the Gold Coast’s two beachside suburbs that are located closest to the Motorway.

Like a lot of predictions and forecasts this year, the majority have not eventuated…thankfully. However the market now finds itself in a place where nervousness surrounds the potential impact of reducing stimulus and what this may mean for the broader economy. Investors are yet to return to the property sector in any great numbers which has meant that first home buyers have experienced a less competitive purchasing environment. At NPR Co we don’t expect this to last throughout 2021 as the opportunity of cheap money combined with the prospects of good capital growth will again drive improved sales.

Tasman Nealon | Property Economist

Queensland's Top Rental Markets in 2020 : Part 3 Apartments

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