Rents Firm at Present but Upward Trend in Sight

In a new national and regional centre rental review by rpdata, it was found that national rental rates remained flat over the June quarter.

Although this comes after recording a 2.9 per cent increase over the past 12 months, it was found that rents have shown little growth over the recent quarter, with the median weekly advertised rents for houses recording no change and median rents for units only increasing by 1.4 per cent.

According to rpdata.com research analyst Cameron Kusher, the slowdown in the rate of rental growth is commensurate with the Reserve Bank of Australia’s aggressive cuts to official interest rates as the Global Financial Crisis hit and the introduction of the First Home Owner’s Grant Boost.

“Both initiatives, coupled with softening property values during 2008 and consistent growth in rental rates during recent years, resulted in a significant boost to affordability for first time buyers.  As a result during 2009, first home buyer activity was at its highest level on record, with first time buyers generally coming from the rental market so it’s no surprise to see that the rate of rental growth has slowed so markedly.”

Moving forward, Kusher believes that this trend won’t continue and the news is not so positive for renters but looking better for property investors.

With vacancy rates remaining below 2 per cent across most capital cities and the likelihood of an increase in demand over the next 12 months due to higher interest rates and home values, which will force many prospective buyers to remain or return to the rental market, there are likely to be rental increases across the board.

“Landlords are likely to be reviewing rental rates to make up for an erosion of profits caused by higher interest rates. Low vacancy rates and ongoing high rental demand means that landlords should have a reasonable amount of leverage to raise weekly rents upon a lease expiry.”

This should in turn, says Kusher, lead to an improvement in rental yields and a greater incentive for investors buying into the residential property market.

Other major highlights of the report included:
• Units outperforming houses for rental growth
• Only cities to record rental increase over June quarter were – Sydney & Canberra
• Nationally to June 2010, both house and unit median rents at $350 per week
• Darwin remains most expensive rental market for houses at $520 per week
• Cheapest rents for houses found in Adelaide at $320 per week
• Most expensive unit rents found in Darwin and Sydney at $420 per week
• Most affordable units are in Hobart at $275 per week
• Greatest quarterly growth for houses – 2.3 per cent in Sydney
• Greatest quarterly growth for units – 3.8 per cent in Canberra

Read the full report