Despite an increased supply of rental properties from investors and developers, Australia’s capital city rental markets remain tight.
Overall, the national median weekly asking rents for houses increased by 0.8 percent over the March quarter while unit rents increased by 0.4 percent.
Sydney is still one of the most expensive capital cities for tenants with record investor activity failing to impact housing shortages.
Median weekly asking rents, at $520 per week for houses and $500 per week for units, remain at the highest level on record for the city.
The median asking rent for houses increased by 2.5 percent to a new record $390 per week and unit rents increased by 1.4 percent to $365 per week – also a new record.
Brisbane house and unit rents remained steady at $400 per week and $370 per week respectively.
House and unit rents in Adelaide also remained flat over the March quarter with house rents steady over the year and annual unit rents increasing by 1.8 percent.
Although Perth house rents were steady at $450 per week over the March quarter, annual growth was down by 5.3 percent with the market continuing to weaken as demand falls.
Unit rents in Perth fell by 1.3 percent to $385 per week over the quarter to be down by 3.8 percent over the year
The Hobart rental market continues to tighten with another sharp rise in asking rents over the March quarter.
Hobart house rents increased by 3.1 percent to $330 per week for a strong annual rise of 6.5 percent.
Similarly, Hobart unit rents were up by 3.7 percent over the quarter for a significant increase of 12 percent over the year.
Darwin house and unit rents both fell over the March quarter, reflecting continued softening of demand and increased supply in the local market.
The median weekly asking rent for houses fell over the quarter by 1.9 percent to $650, while units dropped 3.7 percent to $520.
Canberra house rents remained steady at $450 per week over the March quarter. Similarly, unit rents were steady over the quarter at $390 per week.
Yields remain stable
The residential investment market remains resilient and robust despite record levels of investors.
Yields are stable in most capitals as prices and rents continue to track each other.
Although house yields have fallen below 4 percent in Sydney, they remain well above term deposit rates providing ongoing demand for this investment class in addition to the attraction of strong capital growth prospects.
Upward pressure on rents is set to continue through 2015 in most capitals with the exception of Perth and Darwin.
The prospect of lower interest rates, relatively high comparative yields and capital growth will continue to fuel residential investor activity, particularly in the Sydney market.
Melbourne, Brisbane, Adelaide, Hobart and Canberra are also likely to record continued growth in house rents over 2015, reflecting tight local rental markets.
Unit rents in Brisbane, Canberra and Melbourne, however, are likely to continue to shift sideways due to recent apartment construction in those cities.
Weakening economic activity, particularly from the resource sector, in addition to affordability barriers, are likely to continue to impact the Perth and Darwin rental markets with continued downward pressure on rents predicted in both those cities.
Although debate continues on the introduction of macro-prudential mechanisms and policies to control perceived unsustainable investment lending, residential investment markets clearly remain reasonably balanced and resilient.