Rental Market Report – April 2011

Australian Property Monitors recently brought out their rental market report and predicted strong growth ahead for rents.

Commenting on the APM Rental Report: Dr Andrew Wilson, Senior Economist-Australian Property Monitors said: “In line with APM expectations, rental growth resumed for most capital cities in the March quarter 2011 following a subdued end to 2010.

Rents are rising.
National unit rentals rose sharply by +2.3 percent over the quarter though national house rentals rose by just +0.1 percent. Annualised rental growth comparisons indicate a growing demand for units over houses.

National unit rentals grew by +4.9 percent in the year to March 2011 compared to only +1.3 percent for houses over the same period.

Rental growth, particularly in the unit market, reflects the continuing shortage of available accommodation facing Australian households. Chronically low vacancy rates in most capitals, notably for inner-city or close CBD proximity residences, together with the near record collapse in first home buyer activity in the marketplace, particularly in Sydney and Melbourne, has intensified competition amongst prospective tenants for available properties.

Supply is low
Supply is not keeping up with demand as housing construction levels remain recessed. Only Melbourne provides some hope that more properties will be become available to prospective tenants as a result of its recent boom in inner-city apartment construction, although this is not likely to impact the marketplace until 2012.

Investor Activity Subdued
Investor activity has also been subdued, exacerbating rental market stock shortages. Rising yields however will renew investor interest in the market and may provide some marginal short-term relief for renters. Expect however significant growth in rentalsoverall, particularly units, to continue through 2011, driven by accelerating economic activity, household growth, housing shortages and affordability issues associated with entry-level home buyers continuing to strangle the market.

What’s happening around the country?
Sydney, Adelaide, Perth and Canberra recorded growth in house rentals in the December quarter, with Adelaide and Canberra leading the pack with rental increases of +3.0 percent and +2.2 percent respectively. Hobart house rentals were flat over the quarter, however Melbourne declined by -1.4 percent and Darwin was down by a substantial -9.1 percent.

Unit rentals grew strongly in each capital city except Brisbane and Hobart which were flat. Most rises were over +2.0 percent and were led by Darwin +4.7 percent, and Melbourne and Perth which each recorded +2.9 percent growth over the quarter.

Sydney and Canberra have produced the strongest rental growth for dwellings over the past year reflecting ongoing high demand and a significant shortage of available properties in those markets. The January floods in Brisbane have not impacted on rental growth with no change in median rentals for both houses and units over the quarter.

Sydney, Darwin and Canberra are the most expensive capitals for renting in the nation with Hobart and Adelaide the least expensive.

Increased rental growth combined with continued subdued prices growth in most capitals has reinvigorated gross investment yields over the quarter. Canberra and Hobart continue to provide investors with the nations highest gross yields for both houses and units.

Rental growth should continue to rise ahead of capital growth over the next quarter with yields rising as a consequence, particularly in the unit market. A general re-emergence of price growth from mid-year in most capital city markets combined with ongoing solid rental growth will produce a stabilising of yield outcomes for investors.

With the prospect of rising yields in the shorter-term and a subdued buyers market, solid capital growth opportunities appear to currently exist for investors in most markets.”

Source: Australian Property Monitors


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