28 Apr Rental markets post fastest growth in 14 years
Author: Nila Sweeney of AFR
Rental markets across the country kicked into higher gear during the first three months of the year, with a 3.2 per cent rise in rents. It was the fastest quarterly growth since May 2007, reflecting the broader economic rebound.
The March quarter also marked a recovery in capital city rental markets, with unit rents rising by 2 per cent across combined capitals.
Capital city unit rents recovered in the March quarter as the economy continued to bounce back. Peter Rae
But the results highlighted the wide discrepancies among cities, with Darwin and Hobart racking up strong rental gains while growth remained subdued in Sydney and Melbourne.
Regional markets continued their strong run with rents climbing by 4.1 per cent after rising by 2.9 per cent in the previous quarter.
Capital city markets have also gained momentum after a sluggish performance over 2020. The combined capital city dwelling rents rose by 2.9 per cent in the March quarter, after a lift of only 0.8 per cent in the December quarter.
Eliza Owen, CoreLogic Australia head of research, said: “I think the March-quarter result reflects some of the strength we’ve seen in the economic recovery, particularly in some of the most impacted areas such as the capital city markets, which have seen negative shocks initially due to the lack of overseas migration but are now bouncing back.
“But it also shows the big discrepancies in performance between the different cities and different types of stocks, with houses attracting more demand compared to units and the inner-city markets of Sydney and Melbourne remaining weak due to COVID.”
Darwin and Hobart houses posted the largest gains with 8.2 per cent and 6 per cent increases in rents respectively. Perth house rents climbed by 5.9 per cent, Adelaide by 3 per cent and Brisbane 3.1 per cent. Canberra rose by 2.4 per cent, Sydney by 3 per cent and Melbourne by 1.6 per cent.
Units in Darwin surged 7 per cent, contrasting with Sydney’s 2.4 per cent rise and zero growth for Melbourne over the same period.
On an annual basis, each of the capital cities notched up positive growth for houses. The performance of units, however, remained mixed across the individual markets.
Darwin and Perth posted 14.3 per cent and 11.7 per cent growth respectively, sharply contrasting with Sydney and Melbourne, which recorded a drop of 4.9 per cent and 8.2 per cent respectively.
“The annual decline in rents across Australia’s two largest cities is attributable to falling rents in the unit sector, where closed international borders have created a demand shock in a market that was already challenged by high supply,” Ms Owen said.
“While conditions across inner-city apartments seem to be stabilising, it is clear the Melbourne apartment market has a long way to go before rents see a more consistent recovery trend.”
While the March quarter performance was encouraging, it was unlikely to signal an imminent rental boom across the country, Ms Owen said.
“It’s probably not a sustainable rate of growth,” she said. “This is the highest uplift in rents we’ve seen since May 2007, but that was a time when there was a massive increase in net overseas migration, so I would say that the rate of growth is likely to ease.
“But the overall recovery and economic conditions should support at least some kind of increase in rental incomes over the rest of 2021.”
Credits to Nila Sweeney and AFR for the article