Aussie rents continue to plummet

CoreLogic has released its quarterly rental review, which reveals that rents fell for the third consecutive month, driven by sharp falls across Sydney:

In fact, the only capital city to record strong rental growth in the year to September was Hobart, where rents rose by 6.2%.

Hobart is also the rental growth leader over the past decade, recording growth in excess of 40% across both houses and units:

With dwelling values now rising strongly, at least across Sydney and Melbourne, rental yields are starting to fall:


Nationally, gross rental yields were recorded at 3.99% at the end of September 2019, compared to the 4.14% over the previous June quarter, although higher than the September quarter of 2018 (3.85%).

Across the combined capital cities, gross rental yields are recorded at 3.71% compared to 3.87% the previous quarter and 3.58% a year earlier. Gross rental yields across the combined regional markets came in at 5.10% in September 19, down from 5.14% the previous quarter, however higher than the 4.95% a year earlier…

Given the recent rapid recovery of dwelling values across the two largest capital cities of Sydney and Melbourne, it is unsurprising that these two cities have seen yields compress the most over the quarter. In June 2019, Sydney recorded a gross rental yield of 3.47%, with yields in September 2019 now similar to one year ago (3.23%).

Melbourne recorded a gross rental yield of 3.69% in the June quarter, while this is lower over the quarter, on a yearly basis yields currently remain higher (3.31%).

CoreLogic’s head of research, Tim Lawless, summarises the rental market as follows:

“The broad based weakness in rental conditions can probably be attributed to a rise in rental supply following the surge in investment and residential construction activity through the previous housing boom which has contributed to rental supply. Additionally, as first home buyer numbers have surged, this has likely contributed to a reduction in demand as renters convert to buyers.”

“Markets where rents are rising the fastest have generally seen less of a supply response, creating tight rental conditions and pushing rents higher.”

Looking ahead, we expect the rental market to tighten over 2020 and 2021, given the sharp fall in dwelling construction amid ongoing strong population growth:

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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