Rental Market Tumbling and Will Slip Further 1

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Friday, July 8th, 2016
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Housing rents have suffered the biggest annual decline on record, dragged down by steep falls in mining cities.

Weekly rents across capital cities are 0.6 per cent lower over the year to June, according to the CoreLogic RP Data rental review.

That’s the sharpest fall for two decades, dating back to 1996 when the series began.

The national average is being depressed by the end of the mining boom, which has pushed rents down massively over the past year, by 16.2 per cent in Darwin and 8.6 per cent in Perth.

Rent growth was slow in other capitals including Melbourne, where rents rose 1.7 per cent, and Sydney, where they rose by 0.4 per cent.

Tenants are paying significantly more in Hobart, where rents rose 4.6 per cent on an annual basis.

CoreLogic research analyst Cameron Kusher says falls are going to continue.

“It is anticipated that the weakness in the rental market will persist and that on an annual basis, we will see rents fall even further over coming months,” he said.

Currently, the median combined capital city rental rate is $484 per week, the lowest it has been since January.

Record low wages, high levels of housing investment and construction and slowing population growth are hurting demand and forcing rents down.

Landlords have little scope to jack up rents and some are having to reduce rents to keep their tenants, the report said.

Owners of older flats may be hit hardest, with so many inner city high rise units being built for a similar rental price.

Gross rental yields – the return to investors aside from capital gain, but before deducting running costs and tax – have now slipped to a record low.

Across the capital cities, rental yields were recorded at 3.2 per cent for houses and at 4.1 per cent for units.

“It’s also likely that we’ll see yields compress further over the coming months,” Mr Kusher said.

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  1. Joel Nash

    In looking at whether or not this is a welcome or othewise development, it should be remembered that average weekly earnings are growing by just 1.7 percent, and that incomes of lower earning households are probably growing more slowly yet.

    Given this, whilst the situation in Perth is obviously a result of oversupply, the relatively steady rental increases in Sydney and Melbourne are almost certainly not a bad thing. Shelter is a basic human requirement, and in situations whereby increases in the basic cost of shelter exceed those of incomes, an increasing number of people will fail to put a roof over the heads of their children. Already, the waiting list for social housing in Sydney is more than ten years long, with more than 60,0000 qualifying for this but having none available.

    In that context, the need to housing affordable within the private rental market cannot be understated. If rents are rising only modestly as in Sydney and Melbourne, that is surely not a bad thing.