Australia posts strongest rental growth since 2007

CoreLogic’s quarterly Rental Review has been released, which recorded 1.9% over the December quarter and by 9.4% year-on-year:

This represented the strongest calendar year of rental growth since 2007.

Combined regional rental growth (12.1%) was stronger in 2021 that the combined capital cities (8.4%).

In fact, rental growth was strong everywhere but Melbourne.

As expected, detached house rental growth was also much stronger than unit rental growth, both over 2021 and the past decade:

Given dwelling values grew by 22% in 2021, far outpacing rents, yields also compressed further across every market:

Commenting on the results, CoreLogic’s Tim Lawless noted:

“For more than 18 months we’ve seen demand for detached housing continue unabated as more renters work from home, either on a permanent or now hybrid working arrangement, which drives demand for more spacious living conditions”…

“In addition to this trend, investors, while still active in the market, have been dwarfed by an over representation of owner occupiers entering the market, upgrading or buying holiday homes that aren’t being added to the rental pool. This is also being played out in the rapid growth in regional rental markets.”

“While demand has risen we generally haven’t seen much of a supply response. Australia’s rental market is mostly reliant on private sector investors to provide rental housing”…

“Investors as a proportion of total mortgage demand moved through record lows in early 2021, highlighting relatively low levels of investment activity across the country and also implying relatively low levels of new rental stock coming onto the market.

“Arguably the regions have less elasticity in rental markets, meaning, when demand rises, supply is less responsive than capital cities where investors are generally more active.”

Full report available here.

Unconventional Economist

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