Rental growth is slowing

Although rental growth may be slowing, rents have continued to rise in nominal terms across the board over both a five and a ten year time horizon.

Over the past five years the rental index has shown growth in Sydney (+23 per cent), Perth (+21 per cent), Melbourne (+15 per cent), Brisbane (+13 per cent), Darwin (+21 per cent), Hobart (+10 per cent) and Adelaide (+16 per cent).

Rental growth

Over 10 years the increase in capital city rent indices has been substantial

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Such is the nature of compounding growth.

Although rental growth ebbs and flows in cycles, it is this dynamic which ultimately tips the balance in favour of being a homeowner over a long term renter.

This is also why the “don’t buy a house” campaign, while probably well-meaning in its intention, was also likely to fail to gain traction in full.

In an inflationary economy rents are likely to continue increasing over the long term and therefore most Australians are likely to aspire to own an unencumbered home for the purposes of their retirement.

West End and South Brisbane are two suburbs in particular with a mass of new supply coming online.



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Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

'Rental growth is slowing' have 1 comment

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    April 29, 2015 @ 1:04 pm George

    I have been shouting from the roofs for the last 2 years that rental growth has not just slowed down but stalled completely and even gone backwards over the last 2-3 years in many areas of Sydney. In Randwick you can now rent 2 bedroom units for $450 – $550pw which previously rented for $600-$700pw. In Kogarah where unit prices have doubled since 2009, the rent of $390pw which I achieved in 2009 clambered up to just $420 in the space of 5 whole years, only to fall back to $410 this year when it was re-let. In Guildford the unit I purchased 2.5 years ago and which was let for $390pw fell back to $370pw last year when it was re-let. So as more and more investors enter the property market so does the rental stock increase and so does downward pressure on rents. It happens religiously during every property boom. Many people are speculating on what will bring Sydney’s booming property market undone but none have identified the problem with rents stalling or falling, vacancies increasing and time to let increasing dramatically from practically zero to 4 or 6 weeks. Witness all the TO LET signs around and how long they stay up. I have even seen some agents advertise 1st week rent free – a ploy not seen since the rental glut of the early 2000s which followed the preceding property boom. So combine falling rental income with higher land taxes and ever increasing strata levies and you start to get an ever increasing gap between rental income and outgoings. Throw in increasing unemployment (affects both tenants and landlords) and there is your recipe for disaster, even without increasing interest rates and removing negative gearing. Hence this slowing rental growth to the point of being negative is a SERIOUS problem!


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