A shortage of inventory and strong demand for housing, especially in regional areas, has caused rental prices to rise dramatically in Australia, despite quarterly growth rates starting to slow in the three months leading up to September.
CoreLogic’s Quarterly Rent Review, released today, shows that the National Rent Index rose 1.9% in the September quarter, up from a 2.1% increase in the June quarter. National rental rates are 8.9% higher year-on-year, the strongest annual growth in housing rents since July 2008.
CoreLogic’s research director, Tim Lawless, said several factors are influencing rent growth, including the desire for single-family homes and the lack of supply due to historically low levels of investor activity.
âRenters are clearly looking for lower density housing options, with house rents increasing at more than double the rate of unit rents over the past year, but this trend is starting to tighten, with national house rents and units increasing at the same rate during the September quarter (1.9%), âsaid Mr. Lawless.
âAnother factor that can contribute to rental demand is that more tenants are working from home, which could lead to a trend towards smaller rental households as tenants seek to maximize their space and work environment during COVID. “
Mr Lawless said private sector investors are the biggest contributor to rental housing and until January 2021 accounted for 23% of housing market activity. The proportion of investors entering the market began to increase, with this segment of buyers accounting for 31% of mortgage demand in August.
Rents for regional homes rose 2.2% in the September quarter compared to rents for homes in the capital, which rose 1.7% during the same period. Regional Australia’s annual rental growth rate of 12.5% ââin September 2021 is the highest annual figure on record, with CoreLogic Rent Index figures starting in 2005.
In comparison, the combined capitals saw 7.5% annual rental growth over the same period, the highest annual growth rate for the combined capitals since January 2009.
âDemographic data shows a clear trend of regional population growth, driven by a combination of more people moving from cities to regions, but also fewer people moving from regional areas to capitals,â he said. he declares.
âWith regional housing rents up 12.5% ââover the past year at a time when household incomes have barely budged, it’s likely that rental affordability will become much more difficult in some areas. most popular regional markets. ”
The strongest quarterly rental growth was recorded in Brisbane (2.6%) and Sydney (2.3%), while Perth, which saw a sharp increase in rental growth earlier in 2021, saw its rates increase by 0.3% during the September quarter.
Adelaide remains Australia’s cheapest capital for rentals, with typical housing rents of $ 440 p / w compared to Canberra’s rates, which are the most expensive in the country at $ 633 p / w. Melbourne is Australia’s second most affordable rental market, with typical accommodation costing $ 450 per week to rent, just $ 9.30 per week more than it costs to rent in Adelaide.
âCompared to household incomes, based on data from March, Melbourne was actually the most affordable capital to rent, with households spending an average of 26% of their gross annual income on renting a home compared to the national average of 28.7%. “said Mr. Lawless.
âWith Melbourne showing the greatest exposure to overseas migration, at least historically, once international borders open, we could see a more substantial increase in rental demand than other cities. If so, we could see Melbourne again registering a faster rate of rental growth. ”
Despite the rise in rental prices in the three months leading up to September, home values âârose 4.8% over the same period, leading to lower gross rental yields, a trend that continued over a period of time. monthly basis over the past year. Gross rental yields fell 48 basis points from 3.77% to 3.29% nationally in the past 12 months.
Darwin has the highest gross rental yield in the country at 6.17%, followed by Perth (4.33%), Adelaide (4.06%), Brisbane (3.93%), Canberra (3.92%) and Hobart (3.89%). Sydney (2.45%) and Melbourne (2.76%) have the lowest gross rental yields.
Although rent growth has slowed quarter over quarter, Mr. Lawless expects rents to increase nationwide for the foreseeable future, but with a modest increase in household incomes, Affordability of leasing will eventually become an issue.
âData from March shows renters were spending an average of 28.7% of their household income on rent payments, which is slightly above the decade average of 28.1%,â he said .
“Renting affordability deteriorated further from there, which is likely to see more tenants turn to higher density rental options where renting tends to be more affordable.”
For the first time, CoreLogic’s Rental Review includes a list of top 30 most expensive and affordable rental suburbs for each capital as well as all key statistics on rents and yields.
For more information or to download a copy of the report, visit https://www.corelogic.com.au/reports/quarterly-rental-review.