Residential rents throughout Australia have stalled as the rental market struggles to absorb significant volumes of new housing stock brought about by high levels of new home completions, the latest report shows.
Releasing the September quarter edition of its Quarterly Rental Review, real-estate information firm CoreLogic said median average weekly rents throughout Australia dropped by 0.3 percent during the quarter to came in at $436 – up by only 0.7 percent compared with the same time last year.
Not surprisingly, weaknesses are primarily concentrated in the multi-unit market in capital cities, where recent building activity has been strongest.
Median rental prices in capital city units fell 0.5 percent in the September quarter and are down 0.3 percent over the past year.
By contrast, detached house rents in regional areas increased by 0.3 percent in the September quarter and are up 2.7 percent year-on-year.
In specific markets, Sydney fared worst whilst Hobart was the strongest.
In Sydney, rents fell 1.0 percent during the September quarter and are down 2.2 percent year on year.
Hobart rents rose by 0.6 percent during the quarter and are up 6.2 percent year-on-year, further exacerbating affordability challenges in that market.
At $464 per week, Hobart rents are more expensive than rents in Melbourne and are second only to rents in Sydney.
CoreLogic Head of Research Tim Lawless said the sluggish rental market is being driven by significant volumes of new completions.
All up, ABS data indicates that 217,448 dwellings were added to the nation’s housing stock in the year to June.
Prior to the recent boom, completions of 150,000 or 160,000 were considered to represent a strong building year.
“The broad based weakness in rental conditions can probably be attributed to a rise in rental supply following the surge in investment and residential construction activity through the previous housing boom which has contributed to rental supply,” Lawless said.
“Additionally, as first home buyer numbers have surged, this has likely contributed to a reduction in demand as renters convert to buyers.”