From CoreLogic:
The pace of rental growth has softened over recent months, but the trend in rising rents remains strong. Nationally, rents have lifted by 8.2% over the 12 months ending August, the largest rise in rents since 2008.
There remains a stark difference between the pace of growth in house rents, where nationally the cost of renting has risen by more than double the pace of unit rents; 9.9% nationally for houses compared with 4.0% for units over the 12 months ending August. This difference between rising house rents and unit rents is most pronounced in Sydney and Melbourne, where unit markets have recorded a substantially lower growth rate. However, most of the capital cities are recording the same pattern, but in a less pronounced way.
“The weaker trend in unit rents across Australia’s two largest cities is likely a reflection of their greater exposure to temporary overseas migrants as a source of rental tenancy, especially foreign students who would normally underpin inner city high rise rental demand. The sharp drop in demand due to closed borders has been exacerbated by high supply levels as both cities come out of an unprecedented surge in inner city apartment construction,” Mr Lawless said.
Although Melbourne and, to a lesser extent, Sydney unit rents remain soft, unit rents are starting to rise in these cities. Sydney unit rents have consistently risen each month during 2021, while in Melbourne, unit rents have been rising since June.
The strongest rental markets remain in Perth and Darwin, however the annual rate of rental growth in these cities appears to have peaked, while rental growth across the remaining capitals is continuing to trend higher.
With national housing values rising by 18.4% and rents rising by a lower 8.2%, the result is ongoing yield compression. Nationally, gross rental yields have fallen to an all-time low of 3.32%. It is no longer just Sydney and Melbourne where rental yields are plumbing historic lows. Brisbane (3.99%), Hobart (4.01%) and Canberra (3.99%) have also seen gross rental yields fall to new record lows in August.
