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House rental prices break records in Australian cities!

Rents are finally on the up and breaking records!

More RentsDomain’s quarterly Rent Report shows that house and unit rents have risen across the combined Australian capital cities over the last quarter (October - December 2021).

House rents have recouped all of the COVID-19 price dip to hit a new record high, resulting in a record price gap between houses and units.

According to the report, house rents have hit record-highs in major cities like Sydney, Melbourne and Brisbane with Brisbane’s house weekly asking rent (at $480) continuing to overtake Melbourne’s (at $445) since March 2021.

Although rents are rising, the pace of quarterly growth has eased for both houses and units.

Once international borders reopen, rental demand will spiral in major cities, particularly in Melbourne and Sydney, which has historically welcomed more overseas migrants.

HOUSE RENTALS

Capital City Dec-21 Sep-21 Dec-20 QoQ YoY
Sydney $600 $580 $550
+3.4%
+9.1%
Melbourne $445 $430 $440
+3.5%
+1.1%
Brisbane $480 $460 $425
+4.3%
+12.9%
Adelaide $450 $440 $410
+2.3%
+9.8%
Perth $460 $450 $415
+2.2%
+10.8%
Hobart $500 $495 $460
+1.0%
+8.7%
Canberra $675 $645 $600
+4.7%
+12.5%
Darwin $600 $620 $550
-3.2%
+9.1%
Combined Capitals $499 $483 $465
+3.4%
+7.4%
Source: Domain

UNIT RENTALS

Capital City Dec-21 Sep-21 Dec-20 QoQ YoY
Sydney $490 $485 $470
+1.0%
+4.3%
Melbourne $375 $370 $385
+1.4%
-2.6%
Brisbane $420 $410 $400
+2.4%
+5.0%
Adelaide $360 $350 $340
+2.9%
+5.9%
Perth $390 $380 $350
+2.6%
+11.4%
Hobart $428 $400 $400
+6.9%
+6.9%
Canberra $530 $520 $495
+1.9%
+7.1%
Darwin $480 $470 $420
+2.1%
+14.3%
Combined Capitals $436 $430 $425
+1.4%
+2.5%
Source: Domain

Mind the gap

Commenting on the record gap in house and unit rent prices, Dr. Nicola Powell, Domain’s Chief of Economics and Research said,

“House rents are racing past unit rent growth, as the increase in demand and competition for larger spaces has resulted in landlords hiking asking house rent prices three times faster than units over the past year.

In some cities, units with more bedrooms also continue to have rent price growth, this reflects the desirability for space from those able to work from home, but also provides an insight into demand demographics.

This scenario is also likely to have led to greater household formation, as renters opting-out of house shares and seek smaller inner-city apartments while they remain more affordable, helping to support a recovery in unit rents.

Rental affordability

Adding to the growing rental affordability concern, Dr. Nicola Powell adds,

“Rental affordability is a growing concern, particularly for lower-income households.

The associated price constraint of a house will have driven a compromise from some tenants to a more affordable unit.

Weaker investment activity did interrupt the flow of rental properties, however investors are back with the share of home loan values for investment on the rise. This will boost supply and is likely to have helped to slow rental price growth over the December quarter.

Competition to secure a rental will escalate once borders reopen and international students, new migrants, and expats action a relocation. This is likely to be further strained by demand from COVID-19 escapees as some return from sea and tree change areas which may result in further increase in rental prices.”

 

Adelaide and Hobart rental markets remain tight.

Tenants are placed in a fierce landlords’ market where it is nearly impossible to find a vacant rental.

Both the cities’ vacancy rates in December were low with Adelaide’s vacancy rates at 0.4 per cent and Hobart’s vacancy rates at 0.3 per cent compared to Sydney at 2.6 per cent, Melbourne at 3.2 per cent, Canberra at 1 per cent, Brisbane at 1.3 per cent, Perth at 0.6 per cent and Darwin at 1.3 per cent.

In Hobart, the resumption of interstate travel, and the summer holidays, has played a role in rising demand and rents, as landlords opt for lucrative short-term leases.

Investment activity in Canberra is on the rise as future equity growth is chased for houses and unit gross yields are attractive.

Although, house gross rental yields are the weakest ever to be recorded for the city, illustrating that purchasing prices are increasing faster than rents.

Rental Yields

Commenting on gross yields from rentals, Dr. Nicola Powell said,

Rising unit rents have kept gross yields higher across capital cities compared to house yields, providing better investment opportunities for potential investors seeking greater cash-fow.

Rental supply remains short in many areas providing little choice and strong grounds for further rental price hikes. Investors are returning to the rental property market to take advantage of these trends - this should help to slow down rent growth.

“Perth houses offer the highest gross rental yielding capital city for the first time on record for investors.

As heightened demand for rentals in Perth outstrips supply due to returning expats and a steady inward flow of residents from other states and territories.

Interestingly for Perth, rent rises have been fairly uniform across property types and bedroom number, bucking trends seen in other cities of a skew in greater rent growth for houses and larger rentals.

The shift to rapid rent increases places a compromise in property type and size at the forefront.

HOUSE YIELDS

Capital City Dec-21 Sep-21 Dec-20 QoQ YoY
Sydney 2.60% 2.68% 3.01%
-2.9%
-13.6%
Melbourne 2.92% 2.97% 3.10%
-1.7%
-5.8%
Brisbane 4.17% 4.27% 4.51%
-2.3%
-7.5%
Adelaide 4.27% 4.21% 4.44%
+1.5%
-3.8%
Perth 5.20% 5.01% 4.95%
+3.8%
+5.2%
Hobart 4.15% 4.22% 4.71%
-1.6%
-11.8%
Canberra 3.70% 3.75% 4.17%
-1.2%
-11.1%
Darwin 5.17% 5.30% 5.40%
-2.4%
-4.1%
Combined capitals 3.45% 3.48% 3.67%
-0.8%
-6.0%
Source: Domain

Commenting on gross yields from rentals, Dr. Nicola Powell said,

“Rising unit rents have kept gross yields higher across capital cities compared to house yields, providing better investment opportunities for potential investors seeking greater cash-fow.

Rental supply remains short in many areas providing little choice and strong grounds for further rental price hikes.

Investors are returning to the rental property market to take advantage of these trends - this should help to slow down rent growth.

Perth houses offer the highest gross rental yielding capital city for the first time on record for investors.

As heightened demand for rentals in Perth outstrips supply due to returning expats and a steady inward flow of residents from other states and territories.

Interestingly for Perth, rent rises have been fairly uniform across property types and bedroom number, bucking trends seen in other cities of a skew in greater rent growth for houses and larger rentals.

The shift to rapid rent increases places a compromise in property type and size at the forefront."

UNIT YIELDS

Capital City Dec-21 Sep-21 Dec-20 QoQ YoY
Sydney 3.39% 3.36% 3.48%
+0.7%
-2.8%
Melbourne 3.94% 3.84% 3.94%
+2.6%
0.0%
Brisbane 5.16% 5.15% 5.11%
+0.3%
+1.1%
Adelaide 5.40% 5.32% 5.39%
+1.4%
+0.2%
Perth 5.76% 5.60% 5.54%
+2.8%
+3.8%
Hobart 3.98% 3.95% 4.54%
+0.7%
-12.3%
Canberra 5.73% 5.62% 5.84%
+2.0%
-1.8%
Darwin 6.83% 7.02% 7.05%
-2.8%
-3.2%
Combined capitals 3.96% 3.90% 4.00%
+1.4%
-0.9%
Source: Domain
About Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years' experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients. Visit: Metropole Property Management
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