The rental market in Regional Australia is continuing to spiral, with CoreLogic reporting that the annual growth rate for rents outside of major capital cities has tripled in the last year.
Sydney and Melbourne still have vacancy rates that sit about the 3% rate that is seen as the correct balance between supply and demand, but outside of those two cities, rates are much lower, representing a slant where the number of renters outstrips the number of available dwellings.
Naturally, that has caused a squeeze on prices, with regional Australian rents going up by 9.6% on average in the last 12 months. In capital cities, the average rise was just 3.3%.
In some specific areas popular with so-called tree changers, the rise was even higher. In Richmond-Tweed Heads, the area around Byron Bay, it was 17.6% and on the Sunshine Coast, it was 15%.
“I think when it comes to the rental market in particular, there is a reflection of the demand that we have seen from lack of migration away from regions and also more people going to regions, where people changing their lifestyles may initially be renters in an area,” said Eliza Owen, Head of Research Australia at CoreLogic. “Regional rents have also come off a pretty low base: the rental market has been quite sluggish in recent years, and that might account for some of the strength in the growth rate as well.”
“I think also, there are people being priced out of regional markets in terms of the purchasing process, and that could be leading to this spillover of demand to the rental market, where people who can’t afford to buy in regional areas now that prices have gone up add to the demand in the rental space.”
With such a rapid rise in rents, property investors are sure to make a serious return to the marketplace in regional Australia.
“I would agree with that, and I think that we are already starting to see signs of it,” said Eliza Owen. “If we look at the ABS finance data for the month of March, the increase in investment lending was about 13%, which is the highest rate of increase since 2003.”
“Investors are already responding to rapidly rising rents. The only constraint is that property investors are more used to what we might call blue chip markets for capital growth, like Sydney and Melbourne, so for regions to attract more investors depends on what kind of region it is.”
“If it’s more remote, like Mildura or Orange, it might be up to communities to demonstrate the rental returns for investors in order to attract them and create more stock, which would ultimately ease rental conditions in the longer term.”