Home rents in biggest annual fall in 20 years: CoreLogic
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Rents fell 0.6 per cent nationally last year Louise Kennerley
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by Larry Schlesinger
Home rents across the combined capital cities fell by 0.6 per cent over the past financial year, led by steep corrections in Perth and Darwin.
Researchers CoreLogic said it was the biggest annual decline since they began tracking the rental market in 1996. By comparison, rents increased 1.1 per cent in FY15 and have averaged 4 per cent annual growth over the past decade.
CoreLogic attributed the decline to the softest wage growth on record, high levels of investment in housing, a boom in residential construction (most of which has delivered new apartments aimed at investors) and slowing population growth.
"The combination of all these factors means that landlords have little scope to increase rents," said CoreLogic in its June Rental Index report.
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Rental growth is at its weakest in 20 years
The weakness was not uniform and in the two largest cities rents did rise over the year.
Melbourne was the strongest performing rental market of the major capital cities over the past year with rents rising 1.7 per cent to $457 per week. Sydney recorded a modest 0.4 per cent rise, but remains the most expensive rental market with a median weekly rental of $596.
Nationally rents fell 0.4 per cent in June and 0.3 per cent for the quarter
CoreLogic forecast further falls as the current weak market conditions persist. It added that there were reports of landlords having to reduce rents to keep tenants in some areas.
The drag on rents means that gross rental yields have fallen from an already low 3.6 per cent 12 months ago to just 3.3 per cent. This means that more and more investors are having to rely on negative gearing tax breaks to offset cashflow losses and hope that property values continue to rise.
Rental returns are weakest in Melbourne and Sydney as rental growth over the past few years has failed to keep up with surging property prices in these two markets.
"With yields so low now in these two cities, we may start to see investors turn their attention to other cities in which housing is more affordable and rental returns are superior," said CoreLogic.
Investors are under the most pressure in the mining-dependent markets of Perth and Darwin, where rents fell 8.6 to $431 a week and 16.3 per cent to $464 a week, respectively.
Rents fell by less than 0.5 per cent in Brisbane and Adelaide. Despite a 4.6 per cent increase over the year, Hobart remains the most affordable rental market with a median asking weekly rental of $356.
Sydney had the strongest apartment rental market, with rents rising 2.8 per cent over the year, while in Darwin, unit rents plummeted 30 per cent
