Bleak outlook for investors as rental growth dwindles

by Julia Corderoy12 Jan 2016
Annual rental growth in Australia had a lacklustre year in 2015, reaching its slowest growth on record.

Australian rental prices increased by just 0.3% in 2015, according to figures from CoreLogic RP Data. The only cities to see an increase in weekly rental rates were Sydney with an increase of 1.9%, Melbourne (2.2%), Hobart (0.6%) and Canberra (1.9%). Rates fell in Brisbane by (-0.3%), Adelaide (-0.2%), Perth (-8.0%) and Darwin (-13.3%).

CoreLogic RP Data research analyst Cameron Kusher says a number of factors have impacted rental growth.

“The construction boom across the capital cities, coupled with slowing population growth, low mortgage rates and the recent heightened level of activity from investors are the major contributing factors to the slowing rental growth in 2015.

“It is clear that the increase in investment stock continues to provide landlords with little scope to lift rental rates while the low mortgage rate environment provides little incentive to push yields higher.”

Kusher says rental growth is likely to remain underwhelming in 2016. 

“We’ve never seen rental growth as sluggish as it is at the moment. Furthermore, we’re expecting to see more of the same over the coming months due to increases in the supply of new housing, rental stock and a further slowdown in migration rates,” he said.

“We envisage that growth in rental rates is likely to remain weak or potentially slow even further over the coming months. The good news for those looking to rent is the possibility that rental rates will fall even further over the coming year.”