Units continued to reign supreme over houses in terms of rental growth in January, reflecting the strengthening shift towards affordability among tenants.
CoreLogic’s monthly housing report showed that the monthly pace of rental growth picked up in January, with national rents up 0.7%.
However, January’s upside was below the peak monthly rental growth achieved in May 2022 at 1%.
CoreLogic research director Tim Lawless said the rise in the pace of rental growth was centred in the capital city markets, where monthly rental growth lifted from 0.6% in December to 0.8% in January.
“Growth in rents across the combined rest-of-state areas reduced from 0.6% in December to 0.4% in January,” he said.
“After recording substantially larger increases through the worst of the pandemic, the rate of growth in house rents is generally easing in most regions, reflecting a transition of demand towards more affordable, higher density types of rental stock.”
This was evidenced by the surge in rental growth, particularly in units across capital cities, over the past year.
Annual change in rents – January 2023 |
||
|
Capital City |
Houses (%) |
Units (%) |
|
Sydney |
8.9 |
15.9 |
|
Melbourne |
6.7 |
13.6 |
|
Brisbane |
12.5 |
15.3 |
|
Adelaide |
12.4 |
13.1 |
|
Perth |
11.9 |
11.6 |
|
Hobart |
5.2 |
8.1 |
|
Darwin |
4.0 |
6.0 |
|
Canberra |
2.7 |
4.7 |
The stellar growth rates in these state capitals can be attributed to several factors, including affordability pressures driving more rental demand towards cheaper rental options.
“There is also a possible reversal in rental preferences as tenants once again seek out housing options closer to centres of amenity such as the CBD and transport hubs,” Mr Lawless said.
Over the coming months, it is crucial to observe how the resurgence in overseas student numbers will impact the rental demand.
“With overseas student numbers surging, it is likely inner-city rental precincts and suburbs close to universities, especially those in Melbourne and Sydney, will see a further tightening in vacancy rates and upwards pressure on rents,” Mr Lawless said.
With these rental improvements, it is not surprising to see gross rental yields trending up higher, rising from an historic low of 3.21% in February 2022 to 3.85% last month.
The improvement over the last 11 months has seen gross yields rise above the levels recorded at the onset of COVID in March 2020 at 3.76%.
—
Photo by Ketut Subiyanto from Pexels.
