CoreLogic has released rental data for November, with rental growth continuing at its strongest pace since 2008:
The trend in rental growth has held reasonably firm since April, with the monthly change in national rents holding between 0.6% and 0.7%, well above the decade average monthly movement of 0.2%.
Every capital city and rest-of-state region recorded a rise in dwelling rents over the month, with house rents generally continuing to record a faster rate of growth than units. Melbourne is one of the few exceptions, where unit rents have risen at a faster pace than house rents over four of the past five months.
“Melbourne’s unit sector was previously recording the weakest rental conditions of any capital city, with rents plunging -8.5% between March 2020 and May 2021. It seems that more tenants are taking advantage of the renewed affordability of unit rentals, especially across inner city precincts where rents had previously fallen sharply,” Mr Lawless said.
Although rents are rising, gross rental yields have continued to reduce as housing values rise at a faster rate than rents. Nationally, gross rental yields fell to a new record low in November, reaching 3.23%.
“Gross rental yields reached a new record low across every capital city and broad rest-of-state region in November implying a growing imbalance between the costs associated with owning a home versus renting a home,” Mr Lawless said.
“With mortgage rates also extremely low, such a small yield profile is not overly concerning at the moment, however as investment activity increases along with the growing potential for higher interest rates, we could see more investors once again relying on a negative gearing strategy over the medium to long term,” Mr Lawless continued.
The latest rental vacancy data from SQM Research shows that rental vacancy rates remain incredibly tight, tracking at their lowest level since 2011:
Thus, rental growth will likely remain strong into 2022.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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