All Australian capitals other than Melbourne and Hobart recorded a drop in the monthly rental index. Perth had the sharpest decline for the month at -1.5 percent, followed by Brisbane at -0.8 percent, and Canberra at -0.5 percent. Sydney, Adelaide, and Darwin also recorded negative growth at -0.2 percent, with Melbourne growing slightly at 0.1 percent and Hobart recording 0.9 percent growth. On an annual basis, Darwin recorded a dismal -15.7 percent growth, followed by Perth at -9.2 percent, Brisbane at -1 percent, Adelaide at -0.5 percent, Sydney at 0.4 percent, Canberra at 1.9 percent, Melbourne at 2 percent, and Hobart at 6.2 percent.
In real dollar terms, Sydney is still the most expensive city to live, with a median average weekly rent of $595 compared to the national capital city average of $483. A number of factors have combined to create the lowest national rents since December 2015, including low levels of housing supply, slowing population growth, and the slowest wage growth on record. According to the CoreLogic report: "Housing supply, and subsequently rental supply, is continuing to rise and set to increase significantly over the coming years given the level of stock under construction."
According to the report, strong property growth and low interest rates have also influenced the decline in rental growth in recent times: "Over recent years, landlords haven't had much incentive to push yields higher due to low cost of debt and strong capital gains... However, with capital gains starting to slow, investors may place a renewed focus on maximising their rental returns, which could prove to be difficult given the already soft rental conditions and substantial ramp-up in housing supply."
According to CoreLogic analyst Cameron Kusher, "While rental rates are falling and values continue to rise, gross rental yields remain at record low levels."Separate figures from SQM Research highlight the situation on the ground, with national vacancy rates climbing 1 percent over the last year to reach 2.5 percent.
Perth had the highest vacancy rate at 5 percent, with Melbourne's vacancy rate at 2.1 percent and Sydney's at 1.8 percent. Despite this national trend, year to year vacancies managed to fall in Canberra, Hobart, and Darwin.
Rental yields are being hit on multiple fronts, with supply levels increasing due to an increase in new dwelling construction and demand falling due to low wages and slowing population growth. According to CoreLogic, we're also starting to see a shift in the type of rental properties being snapped up, with older properties not in demand due to an increased number of high quality properties in central locations with similar prices. According to the CoreLogic report, we're likely to see further reductions in the rental index in the months ahead.
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