Source CoreLogic RP Data
Weekly rents increased in February 2016 but are unchanged over the year
CoreLogic RP Data analysis shows rents across the combined capitals rose by 0.3% in February 2016. Rental rates increased over the month in all capital cities except for Perth and Darwin.
Dwelling rental rates across the combined capital cities are recorded at $485 per week and they are unchanged over the past year. CoreLogic RP Data have been tracking annual rental changes since 1996 and over that time rental growth conditions have never been weaker. At the same time last year rental rates had increased by 1.7% highlighting that the slowdown in rental conditions has been quite sharp over the year. The causes of the slowdown in rental growth is falling wages, excess rental supply in certain areas and lower rates of population growth and population mobility impacting on demand for rental accommodation. With construction activity set to peak over the next 24 months, but many new properties still to settle, there is a real possibility that rental rates will fall over the coming months. Landlords will continue to have little scope to lift rental rates while for renters it potentially means more surety in their accommodation and the potential to upgrade into a higher grade of accommodation for a similar cost.
Looking across the individual capital cities, over the past year, rents have increased in Sydney (+1.5%), Melbourne (+2.2%) and Canberra (+1.6%) while rents are unchanged in Hobart. Rental rates have fallen over the past year in Brisbane (-0.7%), Adelaide (-0.4%), Perth (-8.4%) and Darwin (-13.3%). Rental rates in Brisbane, Adelaide, Perth and Darwin are currently experiencing some of their largest annual falls on record. All capital cities are experiencing annual rental changes which are well below their decade average levels.
Rental index results as at 29 February 2016
|Change In Rents|
The additional accommodation being provided by the current building boom along with moderating but still historically high levels of investment purchasing is adding substantial new dwelling supply to the rental market at a time when the rate of population growth is slowing from quarter to quarter. Wages are increasing at their slowest pace on record which indicates that many renters simply don't have the means to pay more for their accommodation. Landlords haven't had much incentive to try too hard to push yields higher due to the low cost of debt and strong capital gains. These factors are continuing to ease rental market pressures and resulting in the weakest rental market on record.
The factors detailed are likely to remain in place throughout this year, as a result we expect that rental market conditions are likely to remain weak and potentially softening further over the coming months. While this is great news for renters, investors are facing the prospect of weaker
capital gains coupled with falling rents which would push down their yields. The large pipeline of residential construction activity and recent high levels of investment demand means that renters are likely to continue to have plenty of choice when looking to renew their lease.
Key rental and yield statistics across the capital cities
|% Change Quarter||0.5%||1.0%||0.3%||0.6%||-1.5%||1.5%||-1.9%||1.5%|
|% Change YOY||1.1%||2.2%||-0.7%||-0.4%||-8.3%||-0.3%||-13.5%||1.5%|
|Median Rent ($)||$615||$461||$434||$372||$446||$346||$529||$510|
|% Change Quarter||0.8%||0.8%||0.2%||0.5%||-1.7%||1.5%||-1.9%||1.6%|
|% Change YOY||3.0%||1.8%||-0.4%||-0.5%||-9.3%||3.1%||-12.2||2.8%|
|Median Rent ($)||$546||$408||$410||$316||$400||$304||$423||$411|
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