Wednesday 28 April 2021

Rent Growth Strongest in 14 Years

National rental rates rose by 3.2 per cent during the first quarter of this year, the largest quarterly increase in the national rental index in 14 years.

Housing rents may be rising at the fastest pace since 2007, but CoreLogic’s research director Tim Lawless said this hide the diversity of rental conditions in Australia’s markets.

“At one end of the spectrum is Perth and Darwin where annual rental growth is well into double digits and accelerating,” he said.

“At the other end is Melbourne and Sydney where rents are down for the year.”

Houses and units in Darwin showed the strongest growth in rental rates for the quarter, up 8.2 per cent and 7 per cent for units, CoreLogic’s Rental Review figures showed.

Lawless said the annual decline in rents in Australia’s two largest cities was due to falling rents in the unit sector, which had experienced curbed demand thanks to internal border closures, on top of already existing supply challenges.

Australia’s rental markets

Region Median Rent Month Quarter 12 months Gross Yields 12 months ago
Sydney $570 0.6% 2.8% -0.2% 2.74% 2.96%
Melbourne $443 0.2% 1% -3% 2.92% 3.2%
Brisbane $463 0.9% 3% 4.2% 4.28% 4.41%
Adelaide $419 1.1% 2.9% 4.9% 4.31% 4.5%
Perth $456 2% 5.9% 14.2% 4.4% 4.3%
Hobart $486 2.2% 6.1% 3.8% 4.5% 5.02%
Darwin $519 2.4% 7.7% 16.5% 6.2% 5.86%
Canberra $612 1.3% 2.6% 5.1% 4.43% 4.79%
Combined Capitals $481 0.8% 2.9% 2.2% 3.25% 3.46%
Combined Regionals $431 1.4% 4.1% 8.6% 4.69% 4.97%
National $466 1% 3.2% 3.9% 3.55% 3.76%

^ Table reflects change in rents and gross yields for all dwellings. CoreLogic’s Q1 Rental Review.

Melbourne recorded the weakest growth in rents during the three months to March, with house rents up 1.6 per cent and unit rents unchanged for the quarter.

Melbourne unit rents have fallen by 8.2 per cent for the year while Sydney unit rents are 4.9 per cent lower, according to CoreLogic.

“Some inner-city precincts of Melbourne have seen unit rents fall by more than -20 per cent during the past 12 months,” Lawless said.

“Prospects for a material improvement in rental conditions in these inner-city high-density precincts are largely dependent on a return of tenancy demand from international students and visitors, who were previously a key component of rental demand.”

Lawless said that housing values had been rising at a faster rate, which meant rental yields had compressed across most of the capital cities.

“The exceptions are Perth and Darwin where rents have risen at a faster pace than housing values, driving a rise in yields,” he said.

“Outside of Sydney and Melbourne, with mortgage rates so low, yields are generally high enough to provide investors with positive cash flow opportunities from the outset.”

Across the combined regional markets, rents increased 4.1 per cent in the first quarter of the year while rents in the combined capitals increased 2.9 per cent.

Regional units recorded the highest quarterly rental growth of 4.8 per cent compared to the 2 per cent rise in capital city units.

Capital city house rents were up 3.3 per cent while regional houses rose by a higher 4 per cent in the three months to March.

Canberra was not only the most expensive market to rent a house across the capital cities, but also the most expensive capital city unit rental market in the quarter at $513 per week.


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