The pace of rental value growth lifted in January as leasing markets enter the seasonally stronger first quarter of the year, according to CoreLogic’s national Home Value Index (HVI).
Vacancy rates have returned to record low levels, but there is hope for renters, with new data showing competition for properties is starting to ease. Vacancy rates in Sydney are back at a record low 0.9%, while Melbourne (0.9%), Adelaide (0.3%) and Perth (0.4%) are close to an all-time low.
However, the national rental index recorded its strongest monthly rise since April with rents up 0.8% in January, following a 0.6% rise in December.
“Most years see rental growth accelerating through the March quarter as competition from students and new year leases adds to rental demand. It’s looking like we will see a similar trend this year with the usual pattern of higher rental growth emerging in January,” says, CoreLogic Research Director, Tim Lawless.
Perth and Regional WA Set the Pace
Similar to housing values, Perth and regional WA led the pace of rental growth over the rolling quarter, with Perth unit rents topping the list with a 3.7% rise over the three months ending January. Regional WA house rents were up 3.6%, followed by Perth houses at 3.5% growth.
While Canberra and Hobart have recorded weak rental conditions over the past year, Darwin was the only capital city to record a decline in rents over the rolling quarter, with unit rents down -1.6% and house rents falling -0.4%.
Houses Swap Place with Units for Rental Growth
While the unit sector has recorded stronger rental growth compared with house rents through the recent cycle, this trend appears to be changing with house rents recording a larger rise than units across most cities over the past three months.
Across the combined capitals, house rents rose by 2.5% compared with a 1.4% lift in unit rents, with a larger quarterly rise in house rents noticeable across every capital except Perth.
“The slowdown in unit rental growth coincides with what has likely been a peak in net overseas migration around the middle of last year,” Mr Lawless said. “This has been particularly noticeable in Sydney and Melbourne, the two cities attracting the largest share of net overseas migration. With migration expected to ease from record highs last year, we could see a further moderation in the upwards pressure on unit rents.”
Rental Yields Settle at Just Below Average at 3.78%
Gross rental yields have firmed across most regions, stabilising slightly below the long run average. Nationally, the gross rental yield across all dwellings was recorded at 3.73%, down slightly from the decade average of 3.78%.
Although slightly below average, there has been a solid recovery from early 2022 when the national gross yield reached a record low of 3.16%.
First National Real Estate anticipates that the number of prospective tenants per available property will begin to moderate throughout 2024 as demand pulls back from the peaks seen in 2023, as a result of resurgent immigration.