Rent values increased by 0.3% nationally over the month of March.
Despite rental value increases, this has decelerated from a recent peak growth rate of 0.5% in January 2020.
Prior to this March slowdown, the CoreLogic hedonic rental index had seen an upswing in values since September 2019.
This occurred against slight moderations in new dwelling completions, which fell -7.6% over 2019 from the previous year, and lessened the addition to supply in the rental market.
Steady overseas migration also contributed to added demand in the rental market over 2019. It has been documented that overseas migrants typically initially rent when they first arrive from overseas.
However, it is worth noting that overseas migration rates had started to slow a little by September 2019.
Also noting, a deceleration in the growth of rents, as well as a decline in some areas, signals that this growth momentum is facing disruption.
It is worth noting that rent data for the March quarter would capture little of the impact from COVID-19, where the regulations of social distancing that have been most disruptive to the economy commenced on March 23rd.
Overview
National rents increased 0.3% over the month of March, and 1.2% on a quarterly basis to be 1.4% higher over the year. Growth rates decelerated over the month, and are likely to experience further downward pressure amid the COVID-19 crisis.
- Capital city rents are 1.3% higher over the quarter and 1.0% higher year-on-year. Regional rents are 1.0% higher over the quarter, and 2.6% higher over the year.
- Six of the capital city dwelling markets experienced a month-on-month increase in rent values, led by Perth, where rent values rose 0.8% in March. Brisbane rents were flat over the month, and Hobart rent values declined 0.4%
- In March 2020, Sydney remained the most expensive rental market, with a current median rental value of $577/week. The differential between Sydney and the second most expensive rental market, Canberra, has trended down to just $1.
- Despite signs of weakening conditions in the month of March, the overall quarter results show rental increases in all capital city regions, led by a 1.7% increase across the Perth.
- Gross rental yields are currently recorded at 3.76% nationally compared to 3.78% at the end of the previous month, and 4.10% a year ago.
- In the 12 months to March, rental yields fell across six of the eight capital city markets. Yields rose 8 basis points across Adelaide dwellings, and by 15 basis points across Canberra dwellings.
- In the first quarter of 2020, regional rental yields slipped 6 basis points to 4.97%. The combined capital cities regions fell 5 basis points in the quarter to 3.46%.
The rental momentum seen in January now has eased
Rent values increased by 0.3% nationally over the month of March.
Despite rental value increases, this has decelerated from a recent peak growth rate of 0.5% in January 2020.
Prior to this March slowdown, the CoreLogic hedonic rental index had seen an upswing in values since September 2019.
This occurred against slight moderations in new dwelling completions, which fell -7.6% over 2019 from the previous year, and lessened the addition to supply in the rental market.Steady overseas migration also contributed to added demand in the rental market over 2019.
It has been documented that overseas migrants typically initially rent when they first arrive from overseas.
However, it is worth noting that overseas migration rates had started to slow a little by September 2019.
However, a deceleration in the growth of rents, as well as a decline in some areas, signals that this growth momentum is facing disruption.
It is worth noting that rent data for the March quarter would capture little of the impact from COVID-19, where the regulations of social distancing that have been most disruptive to the economy commenced on March 23rd.
Rental rates across the combined capital cities were 0.3% higher over March, with a weekly median rental value of $471. This is $81 higher than the combined regional markets, where the median rental value currently sits at $390 per week.
The difference between capital city and combined regional rents has been trending down fairly consistently since June 2018, as high levels of new supply in capital city regions slowed rental growth.
Signs of a slowdown across the Hobart rental market, while the Perth upswing is disrupted
March quarter data does not capture the full impact of COVID-19 on the rental market.
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However, the closure of businesses leading to a rise in unemployment will create a large, temporary demand shock to the rental market over the June quarter.
This may lead to higher vacancies as more group households are formed in response to loss of income, or tenants try to negotiate lower rents.
This trend may be expected across most markets, but may disproportionately affect the Hobart market, where rents were already unaffordable for many, and the workforce has a proportionately high amount employed in the affected industries of tourism and the arts.
The month of March saw a decline in Hobart rents of -0.4%, with a median estimated rental value of $472 per week.
A similar decline in momentum was seen in property purchase values, which fell -0.2% over the month.
Rental growth across Brisbane was flat over the month, with house rents remaining unchanged and unit rents increasing marginally (0.1%).
This follows a sustained increase in house rents across Brisbane, which were up 1.8% over the year.
It is possible that relatively affordable property and low-interest rates across Brisbane have lowered demand for rental properties, easing pressure on rents.
However, it is worth noting the conversion to owner-occupation may also take stock off the market that would otherwise have been used for renting, thus a reduction in rental demand caused by more owner-occupation is not always a factor in slowing rental price growth.
Against steadily rising values over the first quarter of 2020, the rental yield across Brisbane dwellings fell from 4.48% at December 2019 to 4.41% at March.
Leading rental growth over the quarter and month was Perth.
Rent values increased by 1.7% in the quarter and 0.8% over the month of March.
The 0.8% increase in Perth rents is the highest monthly growth rate in over two years.
The recovery in the Perth rental market has been gaining momentum, as the number of investment properties dwindled in the wake of the collapse of the mining sector.
Unfortunately for those who have been waiting for a rebound in Perth, COVID-19 will present a setback to growth.
However, with mining investment placed to make a recovery, and interest rates at record lows, the Perth and broader WA markets should be well-placed for a cyclical and mining-led recovery once full-scale economic production resumes globally.
