The cost to rent a property in Australia is falling at the fastest pace on record.
According to the latest Rent Review Snapshot released by Corelogic, weekly rental rates fell by 0.3% to $486 across Australia’s capitals in the 12 months to May, marking the fastest annual decrease seen dating back to when the survey was first created in 1996.
Median rental rates stood at $489 per week for houses, and $469 per week for units. Over the past year, rental rates for houses slid by 0.7%, offsetting a 1.6% increase for units.
The reason for the decrease in the headline index is that there are more houses for rent than units across the country.
“The current annual decline in house rents is the largest on record, while annual unit rental growth is occurring at its slowest pace on record,” said Cameron Kusher, research analyst at Corelogic.
By location, there were mixed performances across the country with a distinct divergence between non-mining and mining capitals.
“Over the past 12 months, rental rates have increased in Sydney (+0.9%), Melbourne (+2.3%), Hobart (+3.7%) and Canberra (+0.1%),” said Kusher.
“Rental rates have fallen over the past year in Brisbane (-0.9%), Adelaide (-0.9%), Perth (-8.8%) and Darwin (-16.9%).
The table below, supplied by CoreLogic, reveals the monthly, quarterly and annual change in rental rates by capital city.
With rents falling and property prices continuing to push higher, rental yields also plumbed the lowest level on record.
“At a combined capital city level, gross rental yields were recorded at 3.3% for houses in May 2016 and at 4.2% for units,” notes Kusher.
“With rental rates falling over the past year and an expectation that falls will continue, we may see further compression of yields over the coming months however, this will be dependent on growth in home values as well as the direction of rental rates,” he said.
In light of this, Kusher believes that capital growth “will continue to be a much more important factor for property investors than rental returns”.
That’s something that has received plenty of attention recently given the view expressed by some analysts that the increased investor involvement in the housing market is driving house prices higher, particularly in Sydney and to a lesser degree Melbourne.
“The low yield profile across Australia’s two largest cities, which are also the cities that attract the largest investment demand, suggests that most recent investors, despite the low mortgage rate settings, are likely to be utilising a negative gearing strategy to offset their cash flow losses against their taxable income,” says Kusher.
The charts below look at the annual change in rental growth, overlaid against current rental yields for both houses and apartments. CoreLogic also breaks down the results by capital city.
Though higher than other asset classes, yields across all capitals are continuing to fall at present.
And that trend looks set to continue, according to Kusher, providing a boon to those looking for a property to rent.
“With housing supply, and subsequently rental supply, continuing to rise as growth in wages and the population continues to slow, it is unlikely we will see a turnaround in rental markets in the short-term,” says Kusher.
“As a result, renters will continue to have more choice and may actually be able to move into superior rental accommodation for similar or even lower costs.”
Something to consider, and not only for potential renters but also those looking to invest.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.