rents

RP DATA

Rents are going up and up and up...


With median values falling in many areas of Australia during 2009, one strong aspect of the property market has been the exceptional growth in weekly rental rates across houses and units.

Across the mainland capital cities all property types across each city recorded growth in weekly rental rates through 2008.

On average, rents increased by $41/week for houses and $35/week for units, indicating very strong rental growth.

Darwin has been the standout performer in terms of rental growth during 2008 and surprisingly it was also the best performer in terms of property value growth over that period.

Weekly rents for Darwin houses climbed by $70/week (18%) and unit rents climbed by $60/week (19%). Although Darwin’s property values recorded the greatest increase through 2009, it is interesting to note that Darwin maintains the country’s best rental yields at 6.25% for houses and 6.44% for units.

Just behind Darwin was Sydney where median house rents increased by 18% over the year and unit rents climbed by 14%. Following close behind Sydney was Melbourne where rental rates for houses increased by 17% and units increased by 14%.

Adelaide and Canberra were the two cities which underperformed. Adelaide house rents climbed 5% during 2008 and unit rents increased by 4%.

Canberra’s median weekly rental for houses increased by 4% and units by 6%.

It is important to note that along with Darwin, Adelaide was the only other capital city market to record positive value growth during 2008. As this growth is likely to slow during 2009, we would anticipate further rental growth for Adelaide during the year.



Throughout Australia’s Local Government Areas (LGA’s) some regions performed particularly strongly during 2008 in terms of rental growth.

Across houses the top three positions are held by mining and resource areas with Belyando and Broadsound LGA’s in the Central Qld mining areas and Port Hedland located in Pilbara Region of WA. Belyando and Port Hedland in particular, have seen astronomical growth in rents through 2008, largely driven by a shortage of supply of housing within these regions.

Outside of the mining and resource areas it has been the more affluent areas of inner Sydney and inner Perth which have witnessed strong increases in weekly rental rates. This has occurred despite the fact that many of these areas have recorded value falls and have been hampered by a slow rate of sales coupled with significant increases in property listings during the latter part of 2008. The results show that quality inner city property will continue to witness strong long-term demand for both owner occupation and rental occupation.



Across the unit markets, the list is almost exclusively populated by inner city areas and high quality waterfront precinct close to CBD’s. The two exceptions are Kalgoorlie-Boulder which is a mining area in WA which has seen strong housing demand result in a significant increase in weekly rents and Bassendean located to the east of the Perth CBD. The other interesting point to note is that the list is dominated by suburbs within Sydney and Perth, with Kalgoorlie-Boulder and Darwin the only LGA’s located outside of these areas.



Throughout 2009 it is anticipated that rental growth will continue to be strong, although it may not be as strong as that witnessed during the last 12 months. Rental vacancy rates throughout the country remain tight and although the Government is offering up attractive incentives for first home buyers currently, many are still not in a financial position to purchase.

The tightness of the rental market is highlighted within recent data from the Real Estate Institute of Australia (REIA) which shows that vacancy rates throughout all Australian capital cities except Perth (2.4%) and Canberra (2.3%) sit at levels below 2%.

Recent estimates from ANZ bank suggest that nationally underlying demand for housing sits at 180,000 new dwellings annually, in the year to Sep-08 approximately 150,000 new dwelling commencements occurred (an under supply of 30,000). This ongoing under supply, with commencements likely to start trending downwards as have approvals, is likely to result in tighter rental markets and additional upwards pressure on rental rates. This will be particularly felt in capital city markets and in particular, desirable inner city locations.