The CoreLogic Quarterly Rental Review for June showed a strong uplift of 6.6% in rent values over the year. This follows a decade of relatively subdued annual rent growth, averaging 1.8% since June 2011. The annual growth rate of 6.6% marked the strongest annual uplift in over a decade.
CoreLogic data across 88 SA4 markets₁ shows that, as with the current housing market upswing, rental market increases have been broad-based. Annual rent increases were observed across 79 of the 88 SA4 markets analysed, ranging from a 0.2% rise in the North East and North West Melbourne rent markets, to a 23.7% increase in rent values across the South East of Tasmania.
Areas which had seen a decline in rent values over the year were largely concentrated across Greater Sydney and Greater Melbourne, with the exception of a slight decline in Outback Northern Territory rent values.
Figure 2 outlines the highest and lowest gains in rent values for the 2020-21 financial year, while the full list of SA4 results is provided in figure 5. Among the top 10 regions for annual growth in rents were five Perth markets, Darwin, and regional, lifestyle markets of Australia.
Figure 1. Rolling annual growth in rent values and decade average, national dwellings
The South East of Tasmania tops the list with rent value growth of 23.7%. Applying this growth figure to the median rent suggests an increase of $83 per week in rent over the year. The region has seen a -19.3% decline in total rent listings counted over the June 2021 quarter, compared with June 2020. Net internal migration data suggests for the year to June 2020, the South East region saw a positive migration trend, of an additional 660 people moving to the region from other parts of Australia. Historic overseas migration to the region has also been positive, and may have contributed to upward pressure on rent values. While regional migration data is lagged to the previous financial year, more recent provisional migration estimates also shows positive internal migration across regional Tasmania more broadly.
Greater Perth is comprised of six SA4 submarkets, five of which are featured in the top 10 list for annual growth in rental values. Across these five regions, rental markets have tightened significantly in the past year, seeing an average decline of -29.5% in rental listings counted between the June 2020 and June 2021 quarters. In the case of Mandurah, the volume of rental listings had declined over -40%. Detailed ABS employment data suggests that each of these regions had also seen an uplift in employment across the mining industry over the past 12 months, which may have added to the demand for rental properties in these markets.
It is also worth noting for Perth and Darwin rental markets that strong uplifts in rent values may be exacerbated by a longer term retreat of investor activity. In 2014, a shift in housing demand was created by a decline in mining activity, and subsequent mining employment. Available rent listings (figure 3), and investor financing for the purchase of housing, trended down fairly consistently through the late 2010s, as investors responded to a fall in rental returns. The recent uplift in housing demand may be exacerbated across Perth and Darwin by this backdrop of slowly dwindling rental supply.
Figure 3. Monthly total rental listings count – Greater Perth and Darwin
The regions that have experienced rental declines over the year still largely reflect areas that had previously been exposed to high levels of overseas migration.
Figure 4 plots the sum of net overseas migration in the three years to June 2019 (a pre-pandemic measure), against the annual change in rent values across SA4 markets.
The trend shows a negative correlation between overseas migration and annual rent growth for the 2020-21 financial year, reinforcing the impact international border closures have had on reducing rental demand. It is thought that because most overseas migrants and visitors to Australia are initially renters, concentrating in built up areas of Sydney and Melbourne, that a halt in overseas migration has most immediately, and disproportionately, impacted rental markets.
Other trends evident across regional rent market performance are those that are also reflected in purchasing price growth and internal migration. Regional Australian rental markets have generally outperformed those across the capital cities, rising 11.3% over the year compared with a 5.0% rise in capital city rents. But some of the highest growth across rent and property values has occurred in lifestyle markets, here remote work may have enabled more ‘tree-change’ and ‘sea-change’ movement among Australians in capital cities. There may also have been an increase in the purchase of holiday homes throughout the pandemic, which would restrict stock available for longer term rental accommodation.
Figure 4. Annual growth in rent values vs net overseas migration – SA4 markets
Looking ahead, the current trends of rental demand are highly likely to be informed by how COVID-19 continues to impact border movements. It is worth noting that COVID has created a need for more resident mining staff across WA and the NT, as well as cut off a source of demand for rental markets across Sydney and Melbourne. These sudden demographic shifts have created a dramatic change in rental demand, while the supply of rental housing is relatively inelastic in its response. Gradually, more investment housing may ease rent growth across Perth and Darwin, while some Sydney and Melbourne investors may withdraw from these markets until international borders reopen to pre-pandemic migration levels.
Seethe complete highest and lowest change in rent values table across Australia'sSA4 dwelling markets below.,