One of Sydney’s elite beachside suburbs experienced the biggest drop in median rental rates across the country over the past 12months.
The CoreLogic weekly Property Pulse shows the median rental rate for houses in Tamarama dropped by a whopping -40.0%, while units in the Perth suburb of Sorrento also took a significant dip, falling by -35.4%.
Plenty of other elite suburbs around the country also made it to the capital city Top 5 per state list of poor rental performers too (refer adjacent table).
A drop in the combined capital city weekly rents of – 0.2% over the past year looking was the catalyst for today’s research which takes an in-depth look at the capital city suburbs that have recorded the largest falls in weekly advertised rents over the past year.
The latest CoreLogic RP Data Monthly Rental Report for April 2016 showed that weekly rents fell by -0.5% for capital city houses over the past year while unit rents increased by a record-low 1.2%.
Substantial new housing supply, slowing population growth, weak wages growth and recently heightened level of purchasing by investors are all contributing to falls in rents.
With record-high numbers of new units currently under construction, the last Census (2011) showed that units are more than twice more likely to be rented than houses.
Much of the new housing supply under construction is ultimately likely to end up as rental accommodation.
While a drop in rents isn’t ideal for investors, particularly given home value growth is generally slowing, for renters the news is pretty good – it means that they can potentially reduce their housing costs, or find superior accommodation for a similar cost.
With marginally lower rental rates over the past year across the combined capital cities, today’s research identifies significant differences across individual suburbs.
Based on today’s research, there now are many capital city suburbs where advertised rental rates are lower than they were 12 months ago.
For houses, many premium suburbs have seen the largest falls in advertised rental rates over the past year.
Whether this is due to fewer executive rents as population growth slows or previous renters taking advantage of record-low interest rates to borrow to purchase is unknown.
What is clear is that demand for rental houses is easing and in a number of suburbs rental prices have fallen dramatically.
While the suburbs listed are often not the most significantly supplied rental markets, there are signs of weakening growth in many inner-city unit markets.
With more rental supply set to enter the market over the coming years we expect that in order to keep tenants, landlords may have to reduce their rents.
Although the cost of purchasing a house is becoming increasingly unaffordable it seems that the cost of renting is set to become more affordable over the coming years.