The national rental index increased by 0.5% in August, the 36th consecutive month of increases, but the smallest month-on-month rise since November 2020, according to CoreLogic.
In annual terms, national rents were up 9.0% in August which was the lowest annual rate of rental growth since April 2022, but still almost three times above the decade average of 3.2%.
Most areas around the country are clearly losing momentum in the pace of rental growth, however some regions are bucking the trend.
Annual rental growth for Melbourne houses reached a new record high over the past 12 months, up 11.9%, although the rolling quarterly trend has been slowing since May. Similarly, Perth unit rents have reached a new cyclical high in the annual growth rate, up 16.4%. In good news for renters, the quarterly pace of growth across Perth’s unit sector has also been slowing since May.
A slowdown in rental growth occurred despite rental vacancy rates tightening through the month. The vacancy rate across the combined capitals fell to 1.1% which is around historic lows, while regional vacancies also trended lower, reaching 1.4%, the lowest since November last year.
Every capital city recorded a reduction in total rental listings over the past month, reinforcing ongoing concerns around a lack of rental supply. With dwelling approvals continuing to trend lower, especially across the medium to high density sector, the outlook for additional rental supply remains dim.
Since peaking in April at 3.89%, gross rental yields have been edging consistently lower, falling to 3.82% in August. Lower gross rental yields are a symptom of housing values rising slightly faster than rental rates since May.
“With housing values continuing to rise and rental growth easing, it’s looking increasingly like we have moved through a peak in gross rental yields,” CoreLogic Research Director, Tim Lawless said.
“April’s gross yield peak of 3.89% was roughly in line with the decade average of 3.88%. Considering the higher cost of debt alongside higher taxes in some
states and less depreciation benefits, it’s likely net rental yields have compressed further.”
Sixth consecutive rise in values confirms recovery underway
With housing values trending higher over the past six months, it’s clear the Australian housing recovery is firmly entrenched, albeit with some diversity from region to region. Of the 85 SA4 sub-regions nationally, 65 or just over three quarters, recorded a rise in home values over the three months to August. Areas where values were down over the past three months are primarily regional areas with a skew towards regional Victoria and, to a lesser extent, regional NSW. Additionally, three of the four Tasmanian SA4 regions were down in value over the rolling quarter.
Some headwinds remain
Although housing values are broadly rising, some headwinds remain apparent.
Rising stock levels will be one of the most important factors to watch over the coming months. The past two months has seen a subtle rise in total listings in some regions which has supported a deceleration in value growth. Spring and early summer have historically been more active months for property listings and if the winter months are anything to go by, the spring selling season is likely to be more active than last year.