Sydney & Hobart recorded the greatest annual increases in weekly rents while rents in Perth, Darwin & Canberra continue to decline.
According to analysis from CoreLogic RP Data, rental rates across the combined capital cities fell by -0.2% in June 2015 and the annual rate of growth continues to slow reaching new record lows.
Across the combined capital cities, rental rates are recorded at $487 per week and they have fallen by -0.2% over the month, are unchanged over the past three months and have increased by 1.1% over the past 12 months.
The 1.1% annual rise in capital city rents is the slowest rate of growth on our records which date back to December 1995.
The sluggish pace of rental appreciation continues to be attributed to the ongoing boom in dwelling construction across Australia’s capital cities accompanied by record high participation in the housing market from
A high proportion of the inner city unit development in particular is being targeted by domestic investors and foreign purchasers.
Looking across the individual capital cities, over the past year, Sydney and Hobart have recorded the greatest increases in weekly rents.
Over the past three months rents are lower in all cities except for Sydney, Melbourne and Canberra.
Sydney and Melbourne are recording relatively stronger rental growth despite a large surge in new supply and high levels of investment purchasing.
Combined capital city house rents were recorded at $491 per week in June 2015 and unit rents were $462 per week.
The gap in the rental cost remains significantly lower than the actual purchase cost of a house relative to a unit.
Over the past month, house rents have fallen by -0.2% while unit rental rates increased by 0.2%.
Over the three months to June 2015, rental rates for houses are unchanged whilst for units they have barely risen (0.1%).
The data points to the fact that more recently the rate of rental growth has started to slow even further.
Over the past year house rents have increased by 1.1% while units have recorded a slightly greater 1.4% annual rise.
The ongoing slowdown in rental growth is seemingly due to heightened new housing supply and historic high levels of housing investment.
Annual rental growth is currently at its slowest pace on record and is also well below its 10 year average levels.
The 10 year annual rate ofrental growth is currently higher than growth over the past year across each capital city.
Sluggish rental growth is most likely due to surging investment demand, record high levels of new housing construction and a slowing rate of population growth nationally.
These factors are creating more rental accommodation and suppressing rental increases.
With rental rates already increasing at their slowest annual rate on record, we envisage that the growth in rental rates will slow even further over the coming months.
The pipeline of residential construction activity is at a record high which means people choosing to rent will continue to have more accommodation choices and owners will have less scope to increase rent.
With capital city rents increasing at their slowest pace on record and home values continuing to rise, gross rental yields are trending lower.
At a combined capital city level, gross rental yields were recorded at 3.5% for houses in June 2015 and at 4.4% for units.
Combined capital city house rents are currently at a record low level
A year ago, gross rental yields were recorded at 3.9% for houses and 4.6% for units across the combined capitals.
With capital growth anticipated to continue to outpace rental growth we would anticipate that rental returns will push even lower over the coming months.
From an investment perspective it means that any capital growth is going to be much more important for a return from their investment.
Rental yields are lowest for houses in Melbourne (3.3%) and highest in Darwin (5.8%).
In fact, Melbourne house yields are now at a record low.
Unit yields are lowest in Melbourne at 4.2% and highest in Brisbane at 5.4%.
Across most cities house rental yields are lower now than they were at the same time last year, the exception is in Hobart were rental growth has been higher than the rate of capital gain.
Melbourne house yields sit at their lowest level on record while Sydney house yields are at their lowest level since March 2004.
The unit market shows different trends to the detached housing market.
Yields are higher than a year ago in Hobart and Canberra and unchanged in Brisbane and Adelaide.
Unit yields are currently lowest in Melbourne (4.2%) and Sydney (4.3%) and highest in Brisbane (5.4%) and Darwin (5.3%).
The cheaper up front cost of units and their relatively weaker capital growth performance is resulting in a lower decline in yields.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.