Rental values for residential properties have seen an uplift as investment properties are taken up by tenants and new apartment developments begin to stall, according to CoreLogic.
While the latest data is yet to reflect any impacts from the COVID-19 outbreak, there are early indications that rents could potentially come under pressure.
National rents climbed by 0.5% across the country in January 2020 alone, the highest national growth rate seen in a month in two years, the latest CoreLogic data shows.
Looking at year-on-year changes, national rents jumped by 1.3%, which pushed up Australia’s median rental value to $440 per week.
Eliza Owen, CoreLogic’s Head of Residential Research, said rents have seen an upswing since September 2019, following the surge in property prices since June 2019 and a slowing of housing construction in most capital cities.
“It is clear that the rental market is starting to gain momentum again as the investment properties from the previous upswing are absorbed, and new development levels have moderated,” she said.
“This means tenants can expect higher rents in most capital cities.”
Across the capital cities, rents edged up by 0.5% over the month and 2.8% in the year to January 2020.
The weekly median rental value in the combined capital is now at $467, which is $82 higher than the combined regional markets, where the median rental value sits at $385 per week.
Surging dwelling values have squeezed gross rental yields across Australia, which tightened from 4.01% to 3.79% in the 12 months to January 2020.
In the combined capitals, yields sharpened from 3.75% to 3.5% in the same time period.
Rental yields firmed in all capital city markets, except in Perth, Hobart and Adelaide. Perth led the rise in yields by 14 basis points to 4.31%.
Sydney remains to be the most expensive rental market in Australia, with median rents in the Harbour City at $574 per week.
While rents grew by 0.5% in the last quarter of 2019, it is still lower than one year ago when the city’s median rent was at $582 per week.
Interestingly, Sydney is followed hot on the heels by Canberra, where the median rent is at $556 per week. The gap between the two cities is now just $18, making Australia’s capital the second priciest city to rent a home across the country.
While the return in Sydney is 3.01%, the yield in Canberra sits at 4.65%, though this has tightened from 4.79% over 2019. Investors can expect property prices in Canberra to be much lower than Sydney, where the median values are some $630,000 and $870,000 respectively – a difference of about a quarter of $1 million.
Sydney, Canberra and Hobart saw the fastest rental increases in Australia, growing by 0.7% in January 2020.
It is worth noting that out of all the capital cities, Hobart saw the biggest rental growth in the past 12 months, surging by 5.8%.
“Hobart presents a continued crisis in the rental market, with the strongest growth in rents, a tight level of vacancy, and a growing short-term rental accommodation market crowding out long-term tenants,” Ms Owen said.