Most capital city markets have reported steady rents over the September quarter although rentals remain significantly higher than recorded over the same quarter last year.
But Canberra and Hobart bucked the national trend with rents increasing over the quarter by 4.2 per cent and 1 per cent respectively. By contrast Perth house rents continue to fall, down by 2.8 per cent to $350 a week and now the most affordable of all the capitals.
Latest Domain data reveals that house rents in Adelaide, Brisbane, Darwin, Melbourne and Sydney remained stable over the three months ending September, providing some positive news for tenants in those markets.
Although most capitals recorded steady house rents over the September quarter, generally rents have increased sharply over the past year. Hobart annual rents have skyrocketed by 13.6 per cent with Canberra also up steeply by 6.3 per cent, Melbourne rising 5.0 per cent, Sydney up 3.8 per cent and also Adelaide where rents have increased by 2.9 per cent over the past year.
Brisbane annual house rents have remained stable, with Darwin and Perth the clear underperformers with rents falling by 5.5 per cent and 7.9 per cent respectively.
Capital city unit rents were steady over the September quarter with the exception of Adelaide, which recorded an increase of 1.7 per cent. Annual unit rent results revealed a similar pattern to house rental increases with most capitals reporting sharp increases. The exceptions again were the mining capitals of Brisbane, Darwin and Perth where unit rents fell by 1.3 per cent, 5.9 per cent and 6.3 per cent respectively.
For investors, Hobart continues to provide the best gross rental yields with 5.29 per cent recorded over the September quarter. High-priced Sydney and Melbourne continue to report the lowest gross rental yields for houses at 3.12 per cent and 3.34 per cent respectively.
Canberra is the top performer for gross rental yields for units recording 5.77 per cent over the quarter, closely followed by Darwin 5.65 per cent and Hobart 5.53 per cent.
Vacancy rates remained tight in September for most capitals, indicating the prospect of continued upward pressure on rents driven by strong competition for available properties. All capitals have vacancy rates for houses and units now below 2 per cent, with the exception of Brisbane and Perth.
Although capital city home rents were generally steady over the September quarter, the prospect remains for rental increases to resume sooner rather than later in most markets.
Chronic shortages of rental accommodation as indicated by continuing low and falling vacancy rates are being exacerbated by the growing conversion of permanent rentals into holiday accommodation.
Record recent new supply in most capitals has failed to ease shortages with the peak of the recent home building boom now having passed. Reports of new apartments remaining empty is also impeding a rebalancing between supply and demand. The unit markets of Perth, Darwin and Brisbane remain clear exceptions, with unit supply ahead of demand in those capitals and rents lower and still falling.
Recent sharp declines in residential investor activity as a consequence of actions by policymakers designed to restrict lending to this group also spells bad news for tenants if it results in fewer available rental properties. And on the demand-side, high-levels of migration, particularly in Sydney, Melbourne, Canberra and Hobart is also a driver of higher rents.
Home rents in most capitals have increased at a faster rate than incomes over the past year, which will continue to constrain already subdued economic activity through declines in discretionary spending and consumer confidence.
Andrew Wilson is Domain Group chief economist. Twitter@DocAndrewWilson join on LinkedIn and Facebook at MyHousingMarket
