Covid-19 created a two-year-long experiment in working from home, during which many renters reconsidered the value placed on a convenient commute… which they no longer had to make.

As a result, we’ve seen rents in commuting suburbs fall during the pandemic. But how permanent will that change be?

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Are renters ditching the inner city?

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Rents are typically higher in commutable suburbs

Suburbs with good access to public transport command higher rents.

One way to see this commuting-convenience premium is to compare median rents against the share of people that used public transport to get to work in the 2016 Census.[1]

Suburbs on the right are better connected, with more people using public transport to get to work. Median rents in these areas tend to be higher.[2]

These suburbs are typically, though not exclusively, in the inner city.

Even for the many people that don’t use public transport to commute, these inner-city suburbs offer shorter travel times by virtue of being close.

Covid has changed the benefits of short commutes

For many renters, the benefits of living close to work dissipated in 2020. If you’re working from home, there’s far less need for public transport.

And even for essential workers who were still going to work, private rather than public transport became much more attractive.

There was less traffic on the road and travelling via public transport carried higher risks.

This reevaluation shows up in how rents have changed since the pandemic began.

Suburbs on the right, which had a high share of public transport users, have seen median rents decline and have significantly underperformed other areas.

Rents have fallen sharpest in suburbs where people stopped travelling to work

Public transport is only part of the story. Most Australians – four-in-five according to the 2016 Census – use private transport to commute.

Even in inner city suburbs, most people commute via private transport.

For these commuters, proximity to the city is not just about access to public transport – it also shortens their drive.

The relationship is again extremely stark. The larger the decline in the number of people going to work, the bigger the fall in median rent for that suburb.

In suburbs where people have mostly kept going to work, rents have grown – and have done so quite strongly (20% or more) in some areas.

If you don’t need to commute to work anymore… is that sharp rental premium worth it? Picture: Getty Images

Has the premium we place on renting in the inner declined permanently?

As the Covid crisis fades and people return to the office, shorter commutes will start to become more attractive again.

While it’s too early to know whether the premium inner-city suburbs used to command will fully return, we can already see some signs in Western Australia, South Australia, Tasmania, and Queensland – where Covid has been less severe.

In these states, the number of people going to their workplaces is mostly back to pre-pandemic levels.

Rents in these cities have been growing faster than in Sydney and Melbourne.

And while rents in the inner city have grown slower than in the outer suburbs, there is much less of a divide than in is the case in Melbourne and Sydney.

This suggests the weakness in rents we see in inner-city Melbourne and Sydney will start to reverse.

But, even in states where workplace mobility is back to pre-Covid levels, people aren’t using public transport.

Even now, public transport use is roughly 25% lower than pre-pandemic in SA and WA, even though these states have roughly as many people going to work as pre-Covid.

If the shift away from public transport is permanent, inner city suburbs might have permanently lost some of their commute-convenience appeal.

Renting in a suburb where it’s easy to commute to work wasn’t a priority during Covid. Picture: Getty Images

Being able to work from home two or three days a week may have tipped people over to being happy to live further away and drive when they do go to work, rather than live closer and take public transport five days a week.

But public transport and shorter commutes are the not only reason that so many people choose to live in cities.

The density of cities gives residents easy access to an array of services and amenities, such as restaurants, cafes, sporting grounds, cultural activities, etc – not just public transport. Many of these were also shut down during Covid.

As restrictions end, these other benefits of the inner city will start to return. As they do, renting in the inner city – and commuting from the inner city – will become more attractive again.

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Footnotes

[1] Share is among those that went to work – ie it excludes those that were not employed at the time of the 2016 Census, those who worked from home, and those who did not go to work that day.

[2] Of course the rent premium in these suburbs is not driven solely by public transport access; there are many factors that contribute to making these suburbs valuable.

source：realestate.com.au