Rents fall in the June quarter

Rent prices fell across all capital cities in the June quarter according to new figures from RP Data, but the dip in prices is not expected to last.

Research director Tim Lawless warns that rental properties are suffering from the same supply and demand issues as the broader housing market, and only a large injection of new dwellings will bring prices down on a permanent basis.

The data shows that weekly house rents have fallen by about 3.5%, or $15, over the June quarter, with unit rents falling just 0.6% over the same period.

Perth recorded the biggest decrease in unit rent prices with a 4% decline, followed by a decline in Melbourne prices of just under 2%. Canberra unit prices fell by just over 1.5%.

However, unit price increases were recorded in Adelaide at about 2.5%, with Darwin recording increases of slightly below 2.5%. Brisbane recorded an increase of just over 1%.

All capital cities except Darwin recorded decreases in rent prices for houses, with Canberra recording the biggest decline at just over 6% causing the average rent price in the city to fall from $530 in the March quarter to $498.

Darwin recorded an increase in prices of just under 6%, making it the most expensive city for renting a house.

Additionally, gross rental yields for houses have dropped from a peak of 4.7% during March to just 4.4%, which Lawless says is due to the fall in weekly rents and the increase in the value of houses by 2.1% over the June quarter.

The gross rental yield for units has also fallen from 5.4% to 5.3%, with Lawless pinning the decline on a lower growth rate in unit values over the quarter.

But despite the decline in rent prices, Lawless says renters shouldn’t become too complacent and warns the recent decline is only “temporary relief”.

“Rents have been rising very fast over the past three years. While these figures show a fall, which is good for renters, we don’t expect prices to fall dramatically. With vacancies so low and not a great deal of investor activity just yet, there’s just not a lot of supply coming on.”

Lawless says the main issue for rent prices is supply and demand, and says the industry is not keeping up with the number of people who cannot afford to take on a mortgage.

“We’ve seen housing affordability become a real issue, which has simply blocked out a lot of people from buying property, so of course the only solution is renting. Demand is going up, and we are reliant on the private sector to introduce new supply, but it’s not happening. We certainly do need a large injection of stock.”

“Of course, the first home owner’s grant has taken some attention and pressure away from the rental market, and part of the recent decline is due to that, but it won’t last forever. When you have unaffordable housing you will always have more people renting.”