Rents Steady in May
Rents were generally steady in May, according to the latest data from CoreLogic. The national rental index rose 0.2% over the month, following a 0.4% decline in April.
The May rise was not enough to reverse a weakening trend, however, with every capital city except Perth recording a fall in rents over the past two months.
Unit markets are looking weaker than house markets over the past two months, with unit rents falling 0.8% since March across the combined capital cities, while house rents were steady.
Inner city apartment rents are looking precarious due to an imbalance between demand and supply. With a large amount of new inner city, high-rise apartment projects recently completed, and stalled migration and foreign student arrivals, inner city unit rents are likely to fall more substantially than other sectors of the market. The weakness in rental demand is likely to be compounded by significant job losses and income reductions across the hospitality, tourism and arts sectors, in which a larger portion of workers typically rent.
Hobart stands out with a more significant drop in both house and unit rental rates. The reduction in rents comes after a period of rapid rental appreciation across Hobart. Anecdotally, a large number of short-term rental properties have recently transitioned to permanent rentals, which has contributed to higher supply at a time when demand has slackened.
There is a strong chance that rental rates will fall more than housing values, placing downwards pressure on rental yields.
The combined effect of higher supply and less rental demand, especially across unit markets, is likely to place further downwards pressure on yields. In Sydney gross rental yields are already around record lows and Melbourne is not far behind.
Monthly change in capital city home values
|Sydney||▲ 0.4 %||▲ 14.3%|
|Melbourne||▼ 0.3%||▲ 12.4%|
|Brisbane||▲ 0.3%||▲ 3.8%|
|Adelaide||▲ 0.4%||▲ 1.5%|
|Perth||▲ 0.2%||▼ 2.5%|
|Hobart||▼ 0.1%||▲ 5%|
|Darwin||▲ 1.7%||▼ 2.7%|
|National||▲ 0.3%||▲ 8.3%|
Gross rental yields
DISCLAIMER: The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions.