A sharp rise in home values in two of Australia’s largest capital cities hasn’t flowed through to rental rates according to the latest CoreLogic RP Data rental review which today revealed that rental increases are now at their slowest pace on record at 0.7%, over the year.
Based on the August analysis:
- Weekly rents fell by a further -0.4% over the month of August
- Rental growth across the combined capital cities dropped to a new record low of 0.7% over the year
- Sydney rents rose just 2.3% over the year
- Rents have fallen over the past year in Adelaide, Perth and Darwin
- Combined capital city rental rates are recorded at $487/week for houses and $462/week for units
CoreLogic RP Data research analyst Cameron Kusher is anticipating that the rate of rental growth will continue to slow over the coming months due to increased housing and rental stock supply, and slower migration rates.
“Based on year-to-date data results, rental growth conditions have softened during 2015. The 0.7% rise in rental rates over the past year is the slowest rate of rental growth on record based on data which goes back as far as December 1995.
“The reasons behind this lackluster result for the rental market can be attributed to the extent of the current construction boom across the capital cities and slowing population growth.
“Added to this is the surge in investor participation in the housing market which is contributing to weaker rental growth by adding to the rental stock,” Mr Kusher said.
The three cities to experience the largest ramp up in new housing supply and investor activity over recent years and the only three cities to record annual rental growth are Sydney, Melbourne and Brisbane. It should be noted that these three cities have still seen a fairly sharp slowdown in rental growth.
Over the past month, weekly rents have moved lower across every capital city except Sydney and over the past three months rents are lower in all cities except for Melbourne where they are unchanged.
Rental results snapshot:
According to Mr Kusher, the gap the cost of rentals remains significantly lower than the actual purchase cost of a house relative to a unit.
- Over the past month, house rents have fallen by -0.5% while unit rental rates were unchanged
- Combined capital city house rents were recorded at $487 per week in August 2015 and unit rents were $462 per week
- Over the three months to August 2015, rental rates for houses are down -1.0% whilst for units they have increased by 0.2%
The rental data points show that the recent rate of rental growth has started to slow even further. Over the past year, house rents have increased by 0.5% while units have recorded a greater 1.6% annual rise.
According to Mr Kusher annual rental growth is crawling along at its slowest pace on record, and well below its 10 year average levels. The 10-year annual rate of rental growth is currently higher than growth over the past year across each capital city.
“Additional accommodation being provided by the current building boom along with record high levels of investment purchasing is adding substantial new dwelling supply to the market at a time where the rate of population growth is slowing.”
“At the same time as rental growth is slowing the rise in home values is pushing rental yields lower. Across the combined capital cities gross rental yields sit at record lows of 3.4% for houses and 4.3% for units.”
“The ongoing decline in yields is largely being driven by Sydney and Melbourne where rental growth is sluggish and value growth is strong.
As a result both cities currently have record low rental yields,” Mr Kusher said.
Download the full August Rental Review- click here
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