Australian rents rise at fastest annual rate since 2008

A shortage of inventory and strong demand for homes, particularly in regional areas, led to a dramatic increase in rental prices in Australia, despite quarterly growth rates starting to ease in the three months to September.

CoreLogic’s Quarterly Rent Review, released today, shows the National Rent Index rose 1.9% in the September quarter, compared to a 2.1% rise in the June quarter . National rental rates are 8.9% higher year-over-year, the strongest annual growth in housing rents since July 2008.

CoreLogic research director Tim Lawless said several factors are influencing rental growth, including the desire for single-family homes and a lack of supply due to historically low levels of investor activity.

“Tenants are clearly looking for low-density housing options, with house rents rising more than twice the rate of unit rents over the past year, but this trend is starting to ease, with national house and unit rents increasing at the same rate during the September Quarter (1.9%),” Mr. Lawless said.

“Another factor that may contribute to rental demand is more tenants working from home, which could lead to a trend toward smaller rental households as tenants seek to maximize their work space and environment during COVID. “

Mr Lawless said private sector investors are the biggest contributor to rental accommodation and up to January 2021 accounted for 23% of housing market activity. The proportion of investors entering the market has started to increase, with this buyer segment accounting for 31% of mortgage demand in August.

Regional housing rents rose 2.2% in the September quarter compared to capital housing rents, which rose 1.7% over the same period. Regional Australia’s annual rent growth rate of 12.5% ​​in September 2021 is the highest annual figure on record, with CoreLogic Rental Index figures starting in 2005.

By comparison, the capitals combined saw annual rent growth of 7.5% over the same period, the highest annual growth rate for the capitals combined since January 2009.

“Demographic 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 capital cities,” he said. he declares.

“With regional housing rents rising 12.5% ​​over the past year at a time when household incomes have barely budged, it is likely that rent affordability will become much more challenging in some of the most popular regional markets.”

The strongest quarterly rent growth was recorded in Brisbane (2.6%) and Sydney (2.3%), while Perth, which saw strong increases in rent growth earlier in 2021, saw its rates increase by 0.3% in the September quarter.

Adelaide remains Australia’s cheapest capital for rentals, with typical housing rents of $440 per week compared to Canberra’s rates, which are the most expensive in the country at $633 per week. 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 in Adelaide.

“Compared to household incomes, based on March data, Melbourne was actually the most affordable capital to rent, with households spending an average of 26% of their gross annual income on rental accommodation compared to an average 28.7% nationally,” Mr. Lawless said.

“With 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 this is the case, we could see Melbourne record a faster rate of rent growth again.

Despite rising rental prices in the three months to September, home values ​​increased by 4.8% over the same period, leading to lower gross rental yields, a trend that has continued on a monthly basis over the past year. Gross rental yields have fallen 48 basis points from 3.77% to 3.29% nationwide over 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 rise nationally for the foreseeable future, albeit with a modest increase in household incomes, l Affordability of rents will eventually become an issue.

“Data from March shows renters spent an average of 28.7% of their household income on rent, which is slightly above the decade average of 28.1%,” he said.

“Rental affordability has deteriorated further from there, which is likely to see more tenants shift 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.

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