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With international border closures still impacting Sydney and Melbourne, the smaller capital cities are still posting stronger performances across the rental market, a new report has revealed.
The latest data from CoreLogic points to a 0.6 of a percentage point increase in national rents over the past two months to May across the combined capitals, and a 1 per cent increase across the combined regional areas.
Although growth conditions have slowed down a bit, the trend has ultimately remained positive across most regions and housing types.
“Generally, the first quarter of the year is a seasonally strong period for rental markets, so the easing in rental growth is unsurprising,” the report said.
Of the capital cities, Darwin and Perth emerged with the highest annual growth in rent for both houses and units.
Darwin house rents are up by 21.9 per cent while unit rents increased by 17 per cent. Meanwhile, Perth house rents rose by 16.6 per cent while unit rents were 14.2 per cent higher than the same time last year.
On the other hand, Sydney and Melbourne have continued to record the weakest rental conditions, particularly within the unit sector “where closed international borders have had a more significant impact on tenancy demand”.
Sydney house rents have increased by only 4.6 per cent over the year while unit rents decreased by 3 per cent. Meanwhile, Melbourne house rents rose by 1.5 per cent while unit rents fell by 7.7 per cent.
|
Annual change in house rents |
Annual change in unit rents |
|
|
Darwin |
21.9% |
17.0% |
|
Perth |
16.6% |
14.2% |
|
Canberra |
7.6% |
7.1% |
|
Brisbane |
7.3% |
4.3% |
|
Adelaide |
7.2% |
4.1% |
|
Hobart |
7.2% |
2.6% |
|
Sydney |
4.6% |
-3.0% |
|
Melbourne |
1.5% |
-7.7% |
Source: CoreLogic Hedonic Home Value Index, May 2021
Despite lacklustre growth in Sydney and Melbourne, falling rental vacancies do point to an increasingly positive trend, according to Archistar’s chief economist, Dr Andrew Wilson.
He said: “The reopening of borders has resulted in increased tourist and business travel that is fuelling increased demand for the short-term accommodation tenancies in inner Melbourne and Sydney that added to supply in the permanent rental market over the past year.”
Sydney remained the second most expensive capital city to rent, with median house rent at $662.3 and unit house rent at $453.3, according to latest figures from SQM Research. It follows Canberra, where median house rent is $694.6 and median unit rent is $492.9.
|
Median house rent |
Median unit rent |
|
|
Sydney |
$662.3 |
$453.3 |
|
Melbourne |
$507.2 |
$361 |
|
Brisbane |
$494.8 |
$388.3 |
|
Perth |
$519 |
$396.7 |
|
Adelaide |
$437.2 |
$331.7 |
|
Canberra |
$694.6 |
$492.9 |
|
Darwin |
$605.3 |
$426.4 |
|
Hobart |
$490.1 |
$423.8 |
Source: SQM Research - week ended 28 May 2021
Meanwhile, gross rental yields have remained subdued as housing values continue to rise faster than rents, with the average gross rental yield across combined capitals at 3.2 per cent as of the end of May — down from 3.5 per cent last year.
Zooming in on the capital cities, almost each one saw rental yields compress, with the exception of Perth and Darwin, which rose by 3 per cent and 19 per cent, respectively.
Darwin saw the highest gross rental yield at 6 per cent, followed by Perth and Hobart with 4 per cent, Canberra and Adelaide with 4.3 per cent, Brisbane with 4.2 per cent, Melbourne with 2.9 per cent and Sydney with 2.6 per cent.
Regional Australia, on the other hand, trended a bit higher, with the average gross rental yield across combined regional areas at 4.6 per cent — beating out the national average at 3.5 per cent.
Regional Northern Territory saw the highest gross rental yield at 6.3 per cent, followed by regional Western Australia with 6.2 per cent, regional South Australia with 5.5 per cent, regional Queensland with 5 per cent, regional Tasmania with 4.8 per cent, regional New South Wales with 4.2 per cent and regional Victoria with 4 per cent.
Even with the compression in yields, opportunities for cash flow-positive properties have become more abundant than in previous years, largely due to fixed-term mortgage rates for investors averaging below 2.5 per cent, according to CoreLogic.
“With investor activity trending higher along with a surge in new residential construction activity, the longer-term outlook for rents is likely a slowdown in the pace of rental appreciation, at least until international borders reopen, which would help to shore up tenancy demand, especially across the inner-city precincts of Melbourne and Sydney,” the report concluded.
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