CoreLogic has released new data showing that Aussie rents continue to decline, with five of eight major markets experiencing falls over the quarter:
Rental markets have remained subdued, with rental rates falling across five of the eight capital cities over the three months ending October 2019. The largest declines are confined to Darwin, where rents are 1% lower over the past three months, and Sydney where rents are down 0.7%. The only capital cities where rents were up over the rolling quarter were Brisbane (+0.2%) and Adelaide (+0.3%).
Soft rental conditions can be attributed to a range of factors including the recent history of rising rental supply, demonstrated by unprecedented levels of investment participation in the housing market between 2012 and 2017, as well as a significant increase in dwelling construction skewed towards rental accommodation in the high rise apartment sector. Additionally, a larger than normal number of renters have transitioned to first home buyers, thereby denting rental demand.
As dwelling values trend higher and rents languish, gross rental yields are starting to compress. Across the combined capitals, gross rental yields moved through a recent peak in May earlier this year at 3.88%. Since that time, gross rental yields across the combined capitals have reduced back to 3.65% which is the lowest gross yield since November last year.
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: