Growth in rental yields in Australia's capital cities is flat

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Growth in rental yields has slowed to a crawl in housing markets across Australia’s capital cities.

Data from CoreLogic for the 2017 December quarter growth showed rental rate increases were flat for the combined capital cities, down slightly from 0.1% growth in the previous quarter.

“Across the individual capital cities, rents fell over the quarter in Sydney (-0.3%), Brisbane (-0.1%), Perth (-0.7%) and Darwin (-0.5%),” CoreLogic said.

“Rental rates were higher over the quarter in Melbourne (+0.3%), Adelaide (+0.9%), Hobart (+2.1%) and Canberra (+1.6%).”

That left annual growth across the combined capitals at 2.6% — higher than the 1.1% growth recorded for the 2016 calendar year:

Source: CoreLogic

The Sydney rental market still commands a significant premium, with median rent of $581 in the December quarter — 13.4% higher than the second highest capital city, Canberra.

The median rental yield across the combined capital cities is 3.32%, with Melbourne the only capital city which has a current rental yield of below 3%.

CoreLogic said a broad but steady increase in rental yields was still evident despite significant new housing supply in recent years, heightened activity among housing investors and low wage growth.

“In Sydney and Melbourne in particular, supply additions have been significant over recent years as has demand for housing from investors, but affordability remains stretched and population growth remains substantial,” CoreLogic said.

“That’s creating competition for rental stock as new households moving to these cities look for accommodation, and lower income households remain locked out of home ownership.”

While quarterly growth in rental yields was flat across the capital cities, regional areas reported 1.2% quarterly increase leaving combined growth at 0.3% — still the slowest rate of growth in rental yields since 2014.

“The recent disparity between growth in rents in capital city and regional markets is mirroring what is being seen with dwelling values,” CoreLogic said.

Source: CoreLogic

Rental yields on Australian property steadied in the December quarter, as house prices declined in Australia’s major housing markets.

House prices across the capital cities fell by 0.5% in the December quarter, compared to a 0.5% increase in regional areas.

“Dwelling values fell over the final quarter of 2017 and while rental growth also slowed it remained positive which resulted in steady gross rental yields,” CoreLogic said.

“Overall the data indicates that although rental growth has accelerated over the past 12 months, the quarterly data is pointing to softer growth.”

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