Australian capital city rents were stable in the 12 months to January, marking the first time in at least two decades that rental rates failed to increase.
The latest CoreLogic RP Data rental index grew by 0.2% for the month, leaving the index unchanged from a year earlier.
Rents for houses fell by 0.3% over the year, leaving the average capital city rate at $487 per week. This was offset by a 1.5% increase in rental costs for units which rose to $465 per week.
Be region, including both houses and units, prices rose in Sydney, Melbourne, Hobart and Canberra but fell in Brisbane, Adelaide, Perth and Darwin.
The charts below, supplied by CoreLogic RP Data, reveal the percentage movements in both housing and unit rental rates across Australia’s capital cities.
The group believes that a multitude of factors led to the substantial deceleration in rental growth.
“Heightened construction activity, slowing population growth, higher than normal investment activity and stagnant wage growth are key contributors to unchanged rental rates over the past year,” said the group following the release of the January report.
“More rental stock at a time when demand is easing due to slowing population growth and little wage growth for renters has resulted in flat rental conditions over the past year.”
“For renters there are a lot more accommodation options in the market while landlords are having to respond to a more competitive environment which, in many cases means keeping rents steady to keep the tenants.”
With rental rates stable as house prices continued to increase, the average capital city rental yield – combining houses and units – fell to just 3.5%, the lowest level in record.
Capital city housing yields fell to 3.4%, down from 3.5% a year earlier, while those for units slid to 4.3% from 4.5% in January 2015.
Given the current trend, CoreLogic RP Data suggest that rental market conditions may soften even further in the months ahead.
“We expect that rental market conditions are likely to remain weak, potentially softening further over the coming months,” says the group. “In fact there is a possibility that rental rates may start to fall on an annual basis.”
“While this is great news for renters, investors are facing the prospect of weaker capital gains coupled with falling rents which would push down their yields. The large pipeline of residential construction activity and recent high levels of investment demand means that renters are likely to continue to have plenty of choice when looking to renew their lease.”
Australia’s housing market may be incredibly expensive for those looking to buy, but when it comes to those willing to rent, conditions have rarely been better.