Weekly rents have only increased by 2.9% across the country and by the same amount in capital cities during the past year, suggesting that falling property prices are hitting the rental sector, new RP Data figures have revealed.
The research company expects that lower activity among first home buyers in the next year will see them remain in rental properties, ensuring vacancy rates remain low and more upward pressure is placed on rents.
The results are well below the average for the past five years, which saw capital city rents increase by an average of 7% for houses and 7.9% for units.
The national median rent is now $360, with capital city rents at $380 and during the past five years rents for units have increased more than houses.
“As many investors will be aware, rental growth has been relatively subdued since 2008 due to a number of factors such as stimulus from low interest rates and the First Home Owner’s Grant boost,” says RP Data’s Cameron Kusher.
He says those factors drew new home owners out of the rental market, increasing the amount of stock available for other renters and putting downward pressure on rents.
Since the start of 2009 rents for houses in capital cities have increased just 4.1%, with units rising 8.6% and across the country house rents are up by just 4.3% since the start of 2009, with unit rents only up by 7.6%.
Kusher says rental growth should increase in the short term as more first home buyers remain inactive and scout out bargains, fearing higher interest rates.
“Limited new development during 2011 is likely to add to the upwards pressure on capital city rental rates and as a result we expect rental growth to revert to around five year average levels,” he said.
RP Data expects inner city units and outer “more affordable” housing stock to have the greatest prospects for growth and regional stock may not see much growth, with Kusher saying growth prospects are limited.
“Tourism markets remain weak and economic drivers in many of these regions, particularly those not linked to the resources sector, are limited and are unlikely to fuel significant competition for rental stock,” he said.
The results show rents for houses in capital cities remained flat everywhere except for Sydney and Perth during the June quarter, which saw increases of 2.2% and 2.6% respectively, while rents in Darwin fell by 2.9%.
Unit rental growth was flat in Melbourne, Adelaide and Hobart. Rent grew by 4.7% in Sydney, 1.4% in Brisbane and Perth, and by 1.2% in Canberra.
Darwin was the most expensive capital in which to rent, with median prices at $520 per week followed by Canberra at $500 and Sydney at $460.
Adelaide and Hobart are the cheapest cities in which to rent houses with a median of $330, while overall rents are cheaper in Melbourne at $360 and Brisbane at $370.
Rents are most expensive for units in Sydney at $450 and Canberra at $430, while the cheapest cities are Hobart at $280, Adelaide at $290 and Melbourne at $350.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
