- Across the combined capitals, median asking price for houses is $499 per week
- For units, this is $436 per week
- Rent growth may slow down as more investors enter the market
Both house and unit rents have reached record highs across the combined capital cities, according to data released in Domain’s quarterly Rent Report.
The report found that over October – December 2021, house rents have recouped all of the pandemic-induced price dips to hit the record high.
This has resulted in a record gap between houses and units.
Sydney, Melbourne and Brisbane have all seen their house rents hit record high levels.
The Brisbane weekly asking rent at $480 is still higher than Melbourne ($445), a trend present since March 2021.
December Quarter Rents – Houses
While rents are still rising, the pace has eased for both types of dwellings.
December Quarter Rents – Units
Once international borders open, rental demand is expected to rise rapidly, especially in Melbourne and Sydney.
Domain’s Chief of Economics and Research, Dr Nicola Powell, said the record gap between houses and units has been exacerbated by the demand and competition for larger spaces, with landlords pushing asking prices up three-fold between houses and units.
“In some cities, units with more bedrooms also continue to have rent price growth, this reflects the desirability for space from those able to work from home, but also provides an insight into demand demographics,” said Dr Powell.
“Rental affordability is a growing concern, particularly for lower-income households. The associated price constraint of a house will have driven a compromise from some tenants to a more affordable unit.
Nicola Powell, Domain
While weaker investment activity interrupted the flow of rental properties into the market, Dr Powell noted that investors have returned, with the share of home loan investment values rising.
“This will boost supply and is likely to have helped to slow rental price growth over the December quarter,” she said.
“Competition to secure a rental will escalate once borders reopen and international students, new migrants, and expats action a relocation.
“This is likely to be further strained by demand from COVID-19 escapees as some return from sea and tree change areas which may result in further increase in rental prices.”
The data is also backed by SQM Research, with all houses asking price at $608, the highest ever.
Competition higher for the smaller capitals as investors return
The Adelaide and Hobart rental markets, in particular, remain fiercely tight; The Adelaide vacancy rate is just 0.4%, with Hobart even tighter at 0.3%. Some context: The Sydney vacancy rate is 2.6% and Melbourne 3.2%.
In Canberra, where the rate is 1%, investment activity has been on the rise. Future equity growth is being chased for both houses and units given the yields are attractive – although they are the weakest ever recorded for the nation’s capital.
Domain’s report illustrates that this statistic shows that prices are increasing much faster than rents, which is happening across many of the capital cities.
“Rising unit rents have kept gross yields higher across capital cities compared to house yields, providing better investment opportunities for potential investors seeking greater cash-flow,” commented Dr Powell.
“Rental supply remains short in many areas providing little choice and strong grounds for further rental price hikes. Investors are returning to the rental property market to take advantage of these trends – this should help to slow down rent growth.”