The Australian capital city rental market continues to weaken, new property figures have revealed.
Figures released by CoreLogic RP Data show rents increased slightly by 0.1% in April. However, overall, capital city rental rates edged lower over the year, falling 0.2% over the past 12 months.
Perth and Darwin experienced the largest falls in rents over the year, dropping by -8.9% -12.6%, respectively. Five of the eight capital cities saw modest rises in rents over the past twelve months, including Sydney (1.4%), Melbourne (1.7%), Adelaide (0.5%), Hobart (1.1%) and Canberra (2.5%).
Canberra is the only capital city where the annual rental change is currently stronger than it was a year ago.
Corelogic RP Data research analyst Cameron Kusher
said he anticipates that the weakness in the rental market will persist over the year and rents will continue to fall over the coming months.
The annual change in rental rates continues to be at its slowest pace since before 1996,” he said.
“At the same time last year, rental rates increased by 1.7% which indicates a sharp slowdown in rental growth over the past year.”
The sluggish rental market has been driven by falling real wages, excess rental supply in certain areas and lower rates of population growth.
“With dwelling approvals at recent record highs and construction activity set to peak over the next 24 months, accompanied by many new properties still to settle, we anticipate that the weak rental market conditions will persist with rental growth continuing to slow and, or, fall in most capital cities,” Kusher said.
“Based on current market conditions, landlords won’t be in a position to lift rental rates and may actually need to reduce rents in order to keep their tenants. We see renters as holding a stronger negotiation position and where they now have the potential to upgrade into higher grades of accommodation for a similar, or lower rents.”
In Australia’s two largest capital cities – Sydney and Melbourne – rental yields have hit record lows.
“We’ve seen rental yields move to record lows of 3.1% for houses and 4.0% for units in Sydney and in Melbourne, rental yields are at a record low 2.9% for houses and 4.0% for units,” Kusher said.