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Weakest Rental Conditions Skewed to Cities
5 days AGO

Weakest Rental Conditions Skewed to Cities.

The nation’s weakest rental conditions remain skewed towards higher density markets, especially the cities of Melbourne and Sydney. In Melbourne, the downwards shift in unit rents has been more severe, with rents down -7.6% over the past 12 months.

However, rental rates in Melbourne’s apartment sector look to be stabilising, with CoreLogic’s measure of rents holding steady over three of the past four months. The monthly trend in Sydney apartment rents has recently turned positive, with unit rents consistently rising over the past four months to be 2.8% higher over the year to date.

Finding vacancies more challenging outside capitals

Rental conditions have been stronger outside of Melbourne and Sydney, where demand is less dependent on overseas migration and interstate migration trends have provided an additional lift. Darwin and Perth have shown the most significant lift in rents. Rental supply has also been less substantial outside of Sydney and Melbourne due to historically lower levels of investment activity and less construction aimed at the investor segment of the market.

Extremely low vacancy rates plague 80% of Queensland

A Real Estate Institute of Queensland (REIQ) report has found that more than 70% of Queensland real estate agencies have rental property vacancy rates lower than 1%, whereas 3% is considered the norm.

In Brisbane, vacancies have been lower than half a percent for the past quarter, generating serious challenges for both tenants and property managers.

‘Record-low interest rates, government support and stimulus measures, and the pandemic-driven stampede we’ve witnessed migrating beyond our southern borders have sent Brisbane’s private rental market into uncharted territory, pushing vacancy rates down to their lowest levels since October 2012,’ REIQ chief executive Antonia Mercorella said.

Ms Mercorella called for the First Home Owner Grant to be made available to existing homes in order to solve Queensland’s rental crisis.

Berlin rent control study reveals ‘unintended consequences’

Economists at Munich’s Ifo Institute have conducted a study on the effects of using a rent cap to address rental affordability. However, the study revealed unintended consequences when landlords subject to rent caps sold their apartments, effectively freezing the supply of vacancies.

Economists have for years warned that any impact on the supply of rental accommodation leads to increasing rents. Clearly, when Berlin’s rental market was split in two, landlords who could no longer achieve a positive return bailed out, leaving the same number of tenants to compete for a smaller number of vacancies.

Despite countless studies documenting the adverse impacts of rent caps on the people they’re meant to protect; Governments seem continually drawn to experimenting with them as potential solutions to affordability. Regulatory changes limiting the rights of landlords in Australia make property investment less appealing than other asset classes, thereby contributing to ongoing issues of supply. One thing is certain; the private sector in Australia has a better record in the provision of housing than the government, which is the only alternative.

GROSS RENTAL YIELDS NATIONALLY

Sydney       2.7%        
Melbourne       2.9%        
Brisbane       4.2%        
Adelaide       4.3%        
Perth       4.4%        
Hobart       4.5%        
Darwin       6.1%        
Canberra       4.3%        
National       3.5%        

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