Rent properties: Rental market prices experiences record surge in line with real estate housing boom

Rents have grown at a record rate, as the cost of leasing a home surges alongside the cost of buying one.

Rents have grown at their greatest pace in over 12 years as the dramatic upsurge in Australia’s housing prices is matched in our leasing market.

According to CoreLogic’s national rent index, national rents have recorded their highest annual growth since 2009, as regional rents notch up their largest annual rise on record.

The latest figures from the respected property data firm show national rental rates have surged 6.6 per cent in the 12 months to June 20.

That is the greatest annual growth since January 2009.

Holly Mulley, 24, and partner Alex McDonald, 25, pictured with their 14-month-old son Hunter McDonald at their rental home in Ambarvale. Picture: Jonathan Ng

Regional rent growth has led the way, with an incredible 11.3 per cent growth, again underscoring the appeal of areas out of the metropolitan capitals to homemakers.

That is the greatest rate of regional rent growth since CoreLogic’s national rent index was established in 2005.

In the capitals, CoreLogic reports rental growth is less than half of that, yet it still spiked 5 per cent. That is well ahead of the Consumer Price Index, which rose 1.1 per cent in the latest ABS figures through the March quarter.

“Following subdued rental performance through much of the 2010s, the Australian rental market has seen an increase in values due to many of the same factors that have led to the current housing price upswing,” CoreLogic’s Head of Research Australia, Eliza Owen.

“These factors include increased government stimulus through COVID-19, accumulated household savings through lockdown periods, the swift economic recovery seen as restrictions eased, and a lack of rental supply in some markets have also exacerbated rental price increases, particularly in major centres of regional Australia.”

The growth in rental prices have been an uneven one across the country, with Darwin experiencing a 21.8 per cent rise at the top end with Melbourne witnessing a declined of -1.4 per cent at the other end.

Sydney rent values have grown 3.2 per cent over the past year, Brisbane’s are up by 7.3 percent, Adelaide’s enjoyed 7.2 per cent growth, Perth 16.7 per cent, Hobart 8.8 per cent, and Canberra 7.3 per cent.

Chris and Merna Meurant with their children Noah, 4, and 7-month-old Sam at their Glen Alpine rental home. Picture: Jonathan Ng

However the pace of rent growth is slowing.

“As with house prices, rent prices are seeing a deceleration in growth at the national level and across each of the capital cities,” Ms Owen said.

“This may reflect affordability constraints, but there could also be higher levels of rental supply as investor activity in the market increases. Over May, ABS data showed a 13.3 per cent increase in new finance lent for the purchase of investment property.”

CoreLogic’s national rent index recorded a 2.1 per cent rise in the three months to June 2021, down from the 3.2 per cent rise over the March quarter.

Nationally, gross rental yields were 3.41 per cent in the June quarter, down from 3.55 per over the March quarter and 3.73 per cent a year earlier, as dwelling values outperformed the rise in rental prices.

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The uneven growth in rental prices is due to the different impacts Covid-19 has had on different parts of the country, Ms Owen said.

“In Sydney and Melbourne, unit rents continue to show year on year decline, at -1.1 per cent and -6.4 per cent respectively,” she said.

“As noted in previous quarters, these cities, which have historically had the highest intake of international migrants, have seen rental demand most impacted by international border closures amid the pandemic. Although demand across these unit markets remains fairly subdued, there are signs that rents may be stabilising at lower levels.

Rents are experiencing record growth. Picture: Palisade Miranda

“In fact, Sydney unit rents have begun to creep higher in recent quarters, including a 1.8 per cent uplift in the three months to June.

“Melbourne unit rents have also started to show signs of stabilising, with values remaining flat over the quarter.

“Recent lockdown conditions across Sydney may impact rental markets where there are high concentrations of renters in affected industries, such as hospitality and tourism.

“These regions include the inner city market of Sydney, which has been one of the more subdued Sydney rental markets through the pandemic.

“Hobart rent values also took a hit at the initial onset of COVID-19.

“Anecdotally, many short term accommodation holders had marketed their property on the long term rental market amid domestic and international travel restrictions. However, as domestic travel flows have somewhat normalised, save for sporadic lockdown conditions, the return of domestic tourism may have seen the reversion of this excess supply to short term accommodation.

Lily Pope and Jed Van Der Moolen who finally secured a home in Southport after searching for months amid the Coast's rental shortage. Picture Glenn Hampson

The Hobart rental market saw a peak to trough decline of -5.0% through 2020, and has now recovered to record highs.”

Gross rental yields were lower across all capital cities over the March quarter, according to CoreLogic.

The largest decline was across Hobart down 31 basis points to 4.19 per cent. Darwin remained the highest yielding capital city with houses producing a yield of 5.58 per cent and units 6.94 per cent. This was higher than one year ago.

Currently, Sydney’s gross yield is 2.56 per cent, Melbourne’s in 2.83 percent, Brisbane’s is at 4.11 per cent, Adelaide’s at 4.23 per cent, Perth at 4.33 per cent. Hobart at 4.19 per cent, Darwin at 6.08 per cent and Canberra at 4.2 per cent. The combined capitals yield is currently 3.12 per cent and combined regions is at 4.51 per cent.

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