NATIONAL house rents have hit new record levels across the country, reaching $477 per week in the June Quarter, with Canberra still the capital of expensive rentals.
According to the Domain Rent Report for the June Quarter 2021, Canberra is the least affordable capital city to rent either a house or a unit, with house rents growing by $30 for the quarter, bringing the capital up to a record $630 per week.
At this new high, houses in Canberra are now $60 more expensive a week than at the same time in 2020, reaching its fasted annual growth rate since 2007.
“This sharp rise in house rents is unsustainable against a backdrop of weak wages growth that is unable to support ongoing increases in rent. Tenants no longer able to afford renting a house could be financially forced to opt for a unit, easing rental pressure on houses but shifting it to units,” said Nicola Powell, chief of research and economics at Domain.
The price gap between house and unit rents in Canberra is now at all-time high. And while unit rents were stable over the quarter they were also still sitting at record levels, at $500 a week, climbing $30 on the same period last year.
“Bidding wars are also likely to be common in areas with very few vacant rentals. The vacancy rate has remained steady over the past three months, signalling rental conditions could be stabilising. While Canberra firmly remains a landlords’ market, the pace of rent hikes might start to slow,” added Powell.
Meanwhile, Melbourne is now the most affordable city to rent a house for the first time on record, with rents now at $430 a week.
Melbourne unit prices also dropped by another $10 in the quarter, now $65 cheaper per week than in the same period last year, at $365 per week, following record highs prior to the onset of the COVID-19 pandemic.
“At this time, the difference between house and unit rents were close to a record low, now this value gap has jumped to a record high. This is the steepest downwards adjustment in unit asking rents that Melbourne has ever recorded,” said Powell.
However, outside of the inner-city, regions such as the Mornington Peninsula are seeing record highs in rents for both houses and units, being driven by the shift to working remotely from more lifestyle rich areas.
In Sydney, the rental market is stable, with house rents sitting at $550 per week and units at $470 for the last two quarters. With house rents growing by $10 compared to the same quarter in 2020 and unit rents dropping by $30.
“Though tenants have avoided rising rents, prices are unlikely to fall again and it could signal a turning point in Sydney’s rental market with vacancy rates returning to pre-pandemic levels of February 2020,” said Powell.
Sydney, like Melbourne, has seen tenants now working from home seek out rentals in the outer suburbs or lifestyle locations, with both house and unit rents hitting record rates in areas like the Northern Beaches, Central Coast, outer west and Blue Mountains.
“Interestingly, prices in some inner city areas are back on the rise, suggesting some tenants are looking to take advantage of lower rents or using the rent drop as a bargaining tool to negotiate a better deal elsewhere,” added Powell.
“Unit rents are continuing to decline on the back of closed international borders, and the number of tenants becoming homeowners increasing.”
In Brisbane, house rents are reaching new records for the quarter and units are sitting stable at their peak, being driven by a competitive rental market.
House rents increased by $10 for the quarter and $50 for the year to $450 per week, while units have risen by $20 over the year to $400 per week.
“This is the strongest rate of annual rent growth in almost 14 years for houses and in almost a decade for units,” said Powell.
Increased levels of interstate migration have put pressure on the rental market, pushing vacancy rates to a multi-year low.
“Rising rents have started to improve gross rental yields, suggesting rents are rising faster than purchase prices. Investors have already started to look towards Queensland for better yields and growth prospects, as well as seeking lower entry-prices and holding costs,” added Powell.
In Adelaide, house rents are for the first time at par with Melbourne, with its multi-year low level of rental supply making it the most competitive capital city rental market, along with Hobart.
House rents grew by $5 over the quarter increasing to $430 a week and growing at their strongest annual rate for nearly 14 years, up from $395 per week in the June quarter of 2020.
“Rental price gains for houses continue to surpass units, pushing the price gap to an all-time high. This provides an opportunity for tenants finding themselves priced out of renting a house to secure a better deal for a unit, though it creates a challenge for tenants seeking more space on a budget,” said Powell.
While unit rents were stable at $350 per week, growing by 9.4% for the year, from $320 per week in the June quarter of 2020.
“Properties remain affordable in Adelaide, particularly to those moving from the east coast. Improved gross rental yields and the prospects of future capital growth could entice investors, already a growing buyer sector,” added Powell.
In Perth, both house and unit rents have experienced four consecutive quarters of rising rents, reaching a six-year high.
House rents increased by $20 over the quarter and $80 for the year to $450 per week, with an annual increase of 21.6% making this the fast growth rate in 14 years.
“This is the first quarter to capture the ending of the state government rental moratorium on evictions and rental hikes. Tenants previously protected from rising rents are particularly vulnerable given Perth’s rental market has experienced the biggest upward rent change in more than a decade,” said Powell.
Unit rents grew by $10 over the quarter and $60, or 18.8%, over the past 12 months, to $380 per week.
Demand has been up in the rental market over the last year, with interstate migration and expats returning to the state, leading to a low vacancy rate.
“This gives tenants less choice and landlords greater ground to raise rents. Investors are starting to react to strong property price growth, low interest rates, rising rents and the perceived value that Perth offers compared to the east coast,” added Powell.
In Hobart house rents are also at a record high, rising by $20 for the quarter and $45 for the year to $495 per week, while unit rents dropped over the quarter by $20 to $400 per week, though still up from the $380 per week of the same quarter in 2020.
“Over the past five years, house and unit rents have risen 41% and 43% respectively, surpassing all other capital cities. During this time, there has been a significant lift in population growth, particularly from interstate. The lifestyle and successful management of the pandemic is likely to keep Hobart in the spotlight,” said Powell.
Hobart, with Adelaide, is the most competitive rental market in the country, with the vacancy rate low and bidding wars becoming common place.
Darwin’s house rents are at their highest level since mid-2015, climbing $43 over the quarter to $593 per week, making it the second most expensive capital city to rent in.
Over the year house rents saw their greatest growth since 2013, rising by 20.9% from $490 in the same quarter last year.
Unit rents are also at a record high, not seen since 2016, growing by $20 over the quarter and $70 for the year to $450 a week.
“Working remotely has opened relocation opportunities, changing border restrictions have also kept residents in Darwin longer than originally planned. As Australia contemplates its pandemic path to recovery, Darwin’s revived rental market hinges on economic and jobs growth,” concluded Powell.