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Oversupply in some markets, undersupply in others

Oversupply in some markets, undersupply in others

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A leading economist has presented contrasting forecasts for Australia’s rental markets, with rents expected to surge in some cities and decline in others.

Domain Group senior economist Andrew Wilson said rental relief for Sydney tenants should have come around by now, despite the city seeing rents reach record highs.

“The continued increase in rental prices is indicative of the low numbers of first home buyers and the pressure on the rental market as a result,” Dr Wilson said. 

“Unprecedented residential investor activity in Sydney over the past year and a surge in new dwelling construction have failed to provide rental relief for tenants.”

Dr Wilson noted that despite increases in the past year, Melbourne remains relatively affordable compared to other capitals.

“It is interesting to see that rent for units has increased over the June quarter, despite record new inner-city construction and developments,” he said.

According to Dr Wilson, Hobart rents will continue to increase because of limited supply. Adelaide is experiencing flat prices, but this has come with increased yields for both houses and units in the June quarter.

“Increased home buyer activity – particularly first home buyers – is reflected by the stable housing market,” he said.

For Brisbane, Dr Wilson noted that investor activity and an increased supply of inner-city dwellings have kept prices relatively flat for the past year.

Increased buyer activity has helped bring relief to tenants in Canberra, he said.

“There has been strong growth in unit supply, however we can expect flat or lower rental rates moving forward.”

Dr Wilson said the sharp declines in Perth are signs of an underperforming market with no sign of flattening out.

“Given the rental demand and massive growth in 2013/2014, the market is now returning to normal. Perth’s vacancy rates are the highest of all the capital cities, indicative of the lack of demand.”

Dr Wilson noted the similarity between the Perth and Darwin markets, as both declined over the past year.

“Supply is ahead of demand, with the vacancy rates in Darwin the highest of all major Australian capitals. Despite the decrease in rates, Darwin still has the highest rental rate of all capitals.”

[Related: Two cities set rent records]


Oversupply in some markets, undersupply in others
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