According to CoreLogic, rental markets are becoming increasingly diverse but vacancy rates across most regions remain extremely tight. The general trend across the largest capitals is towards an acceleration in rental growth, especially across the unit sector, but slowing growth across the smaller capitals, particularly for houses.
In Sydney, the annual pace of growth across the unit sector (18.1%) is now almost double the annual growth being recorded for houses (9.4%). A similar trend can be seen across each of the capital cities, where unit rents are rising at a materially faster pace than house rents. The quarterly rise in unit rents over the March quarter was at a record high across Sydney (5.3%) and Melbourne(4.3%).
“There is likely to be two factors at play here. With growth in house rents previously much stronger through the worst of the pandemic, it’s likely more and more tenants have no choice but to seek out more affordable options in the medium to high density sector. Additionally, the surge in overseas migrants and students is likely to be funneling demand in inner city areas and precincts close to universities, transport and amenity hubs, ”CoreLogic’sResearch Director, Mr Lawless says.
Capital city house rents are up 24.8% since the onset of the pandemic in March 2020, while unit rents are up a smaller 19.5%, although they are quickly catching up.
“As rental affordability becomes more pressing, we are likely to see group households reforming, reversing the trend towards smaller households seen through the pandemic. Additionally, tenants are likely to be maximising their tenancy, sacrificing the spare room or home office to spread rental costs across a larger number of tenants. CoreLogic data has also shown a continued lift in rental hold periods, suggesting tenants may have a preference for holding onto their existing lease, rather than braving the search for a new rental.
”Not all cities and regions are still recording a rise in rents. Over the March quarter rents fell for Darwin houses (-1.5%) and units (-0.4%) as well as ACThouses (-1.3%). After historically being one of the most expensive rental markets in the country, the quarterly decline now has Canberra recording an annual reduction in house rents, down-0.8% over the past 12 months.
Top end houses and units lead prices recovery
TheMarchHome Value Index confirmed First National Real Estate’s view that the market has neared the bottom of the current cycle, with the national house value index rising 0.6% in March.
Dwelling values were higher across the four largest capital cities and most of the broad ‘rest-of-state’ regions, led by a 1.4% gain in Sydney. The rise has been attributed to a combination of low advertised stock levels, extremely tight rental conditions and additional demand from overseas migration.
Advertised supply has been below average since September last year, with capital city listing numbers ending March almost-20% below the previous five-year average. Purchasing activity has also fallen but not as much as available supply; capital city sales activity was estimated toberoughly-7% below the previous five-year average through the March quarter.
The lift in housing values was most evident across the upper quartile of Sydney’s housing market. House values were up 2.0% in March and the upper quartile of the unit market was 1.4% higher over the month.