The latest figures from the RP Data – Rismark shows that while property prices are flat rents are starting to increase.
This is good news for property investors but, as always, there are winners and losers .
RPData www.rpdata.com figures show that over the 12 months to March 2011 capital city rental rates have increased by 2.9% which is well below average. However, over the last quarter, capital city rents have increased by a much larger 4.8%.
The view that rents are starting to increase is supported by the most recent CPI data from the ABS which suggests that rents have increased by 1.3% during the first quarter of 2011.
According to RP Data, rents for houses (up 3.3%) have increased by more than rents for units (up 2.0%) during the year. In contrast, capital gains for units (up 1.4%) have outpaced those of houses (down 1.2%) over the same period.
As always, there are winners and losers with some areas experiencing rental growth well in excess of the national benchmark while others dramatically underperform.
Across the various capital cities, rental growth over the year has been strongest in:Sydney (5.3%), Hobart (4.5%), Perth (4.4%) and Adelaide (2.8%).
The laggards for rental growth have been: Darwin (-3.7%), Brisbane (-1.0%),Melbourne (0.9%) and Canberra (2.5%).
Across all cities, rental growth over the last year has been well below the five year average annual rate for capital cities of 7.0%.
With tight rental vacancies and ongoing demand for rental accommodation, we expect that weekly rents will increase in most capital cities.
Although there was a surge in building approvals last year, in many instances this new supply won’t actually get to the market during 2011.
Also, with banks’ lending criteria tight requiring significant pre-commitment of sales within new developments we are seeing fewer new high density developments taking place in inner city areas. These regions in particular are particularly attractive for renters as they provide significant levels of amenity. With less new supply in most capital cities it is likely to create greater competition for available stock and result in rental increases.
Given these conditions, RP Data anticipate that rental growth should be quite strong during 2011. Over the last two years, capital city rents have increased by a total of just 3.2% which is well below the average annual rental growth level of 7.0% during the last five years.
It is anticipated that rental growth this year will be more in line with five year average levels than with recent growth levels, recorded at a time when property values were typically increasing.
Source: RP Data
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.