Rental growth setting records in the regions

Rents are rising at their fastest annual rate since 2008, as regional rents rose at their fastest rate on record and house rents more than doubled the pace of rental growth of units in the past 12 months.

CoreLogic’s quarterly rental review showed Australian rents overall were 8.9 per cent higher at the end of the September quarter as compared to the same time last year.

Rental growth was led by the regions, which posted annual gains of 12.5 per cent to the end of September, the highest level of growth recorded since CoreLogic began tracking rents in 2005.

Over the same period, capital city rents grew by 7.5 per cent.

CoreLogic research director Tim Lawless said there were several factors influencing rental growth, most prominently a desire for detached housing and a lack of housing supply.

House rents grew by 9.5 per cent in capital cities over the year, to reach $529 per week, while unit rents in major cities were up 3.5 per cent over the same period, reaching $450/week.

In the regions, annual rental growth for houses was 12.3 per cent, while unit rents were up 13.2 per cent, CoreLogic said.

“Renters are clearly looking for lower density housing options, with house rents rising at more than double the pace of units rents over the past year, however this trend is starting to narrow, with national house and unit rents rising at the same rate over the September quarter (1.9 per cent),” Mr Lawless said.

“Another factor that may be contributing to rental demand is that more renters are working from home, which could be driving a trend towards smaller rental households as tenants look to maximise their space and working environment during COVID.”

Rental yields in the capital cities averaged 3.02 per cent at the end of September, while regional rental yields sat at an average of 4.35 per cent, CoreLogic said.

Darwin laid claim to the highest yield at 6.17 per cent, followed by Perth at 4.33 per cent, Adelaide at 4.06 per cent and Brisbane at 3.93 per cent. 

Canberra yields sat at 3.92 per cent at the end of September, Hobart’s at 3.89 per cent, while Sydney and Melbourne had the lowest yields of all capitals at 2.45 per cent and 2.76 per cent, respectively.

Mr Lawless said rental yields had been declining on a monthly basis since October last year, with Darwin the only city to record growth in the September quarter.

On a dollar-per-week basis, Canberra remains Australia’s most expensive city to rent a house or unit, with house rents sitting at $690/week and units costing $533/week.

Sydney followed close behind at $661/week for a house and $525/week for a unit.

Adelaide was the most affordable rental city, averaging $459/week for houses and $371/week for units, while Melbourne’s average house rent was $487/week, and its average unit rent was $417/week at the end of September.

“Relative to household incomes, based on data to March, Melbourne was actually the most affordable capital city to rent, with households, on average, dedicating 26 per cent of their gross annual household income to rent a dwelling compared with the national average of 28.7 per cent,” Mr Lawless said.

“With Melbourne showing the largest exposure to overseas migration, at least historically, once international borders open we could see a more substantial boost to rental demand than other cities. 

“If this is the case, we could see Melbourne once again recording a faster rate of rental growth.”

Looking forward, Mr Lawless said rental affordability would likely become an issue across all markets unless household incomes begin to rise more substantially than they are currently.

“Data to March shows renters were spending an average of 28.7 per cent of their household income on rental payments, which is slightly above the decade average of 28.1 per cent,” he said.

“Rental affordability has deteriorated further from there, which is likely to see more renters looking towards higher density rental options where renting tends to be more affordable.”