CHRONIC UNDERSUPPLY OF RENTALS CONTINUES
CoreLogic’s hedonic rental index recorded a further 1.1% rise across the combined capital cities in April, while regional rents were up a smaller 0.5%.
Growth in unit rents is significantly outpacing rises in house rents.
Across the combined capital cities unit rents were up 1.6% in April compared with a 0.9% rise in house rents. The larger rise in unit rents continues a trend evident since early 2022, when unit rents started to rise at a faster rate than house rents, reversing the earlier trend of weaker growth in the unit rental sector through the worst of the pandemic.
According to CoreLogic’s Research Director, Mr Lawless, there are several factors contributing to the higher growth rates across the unit sector.
‘It’s likely rental affordability is playing a role; in early 2022-unit rents were around $70 a week cheaper than house rents, however, with unit rents rising much faster than house rents, that gap has narrowed to just $20 a week in April,’ he said.
‘There is also the additional rental demand from overseas migration, especially students, which tends to be more pronounced in inner city areas as well as precincts close to universities and transport hubs that are typically associated with higher density styles of rental accommodation.
‘Another factor playing out is a lack of new unit supply. Medium to high density dwelling approvals have mostly held below average since 2018, setting the scene for a chronic undersupply across the medium to high density sector a few years from now.’
The trend rate of growth in rents is accelerating in Sydney, Melbourne and Perth. Based on the rolling quarterly change, growth in dwelling rents reached a cyclical high of 3.9% in Sydney and 4.2% in Melbourne. Sydney unit rents are recording the fastest rate of appreciation, rising 5.8% over the past three months, followed by Melbourne unit rents, up 5.0%, and Perth unit rents up 4.9%.
Rental growth is set to persist, with vacancy rates holding around record lows in most regions.
‘Until we see rental demand and rental supply becoming more evenly balanced, rents are going to keep trending higher. The unfortunate reality for renters is there doesn’t seem to be any material lift in rental supply over the short term, while demand side pressures are likely to rise further as migration stays high,’ Mr Lawless said.
Housing market has moved through short but sharp downturn
Overall, it looks like the Australian housing market has moved through what has been a relatively short but sharp downturn. For combined capital city dwelling values, the -9.7% drop from the April 2022 peak to a trough in February 2023 was the second largest on record as well as the steepest decline relative to previous downturns. The -10.2% value decline recorded through 2017-19 is the largest decline since CoreLogic records began in 1980.
‘Typically, we wouldn’t see housing values start a new growth cycle until monetary policy started to ease, credit policies loosened or some level of fiscal support was introduced. The shift towards more positive conditions has come about in the absence of these factors,’ Mr Lawless said.
‘The key drivers of this positive inflection seem to be the larger than expected rise in net overseas migration which has created additional housing demand at a time of extremely tight rental conditions and well below average levels of advertised supply.’
GROSS RENTAL YIELDS NATIONALLY
Sydney 3.2%
Melbourne 3.4%
Brisbane 4.4%
Adelaide 4.1%
Perth 4.9%
Hobart 4.4%
Darwin 6.4%
Canberra 4.1%
National 3.9%
WHAT DO TENANTS REALLY VALUE?
As a landlord, you want to attract the best tenants to your rental property. Understanding what tenants consider the most important attributes of a rental property can help you make informed decisions and maintain a happy and satisfied tenancy.
First and foremost, location is a top priority for most tenants. Properties located in convenient areas close to transportation, schools, shops, and amenities are highly desirable. Therefore, investing in properties with good transportation links and nearby amenities can make your property more attractive to potential tenants.
Safety and security are also critical factors for tenants. They want to feel safe in their home and seek properties in safe and secure neighbourhoods.
The condition of the property is another crucial factor. Tenants look for well-maintained properties that are clean, modern, and comfortable. It is therefore important to keep the property in good condition, addressing any repairs or maintenance issues promptly.
Finally, affordability is essential for most tenants. They look for properties that offer value for money and fit their budget. Offering fair rent prices and transparent utility bills can help attract and retain tenants.
SHOULD YOU HAVE LANDLORD’S INSURANCE?
Being a landlord in Australia is meant to be a profitable investment. However, it comes with certain risks and uncertainties. From property damage to tenant disputes, unexpected events can be costly and cause significant financial loss. That's why landlord's insurance is crucial for any landlord in Australia.
Landlord's insurance provides coverage for a wide range of incidents that could cause damage to your rental property or cause financial loss. It can protect you from various types of risks, including natural disasters, tenant defaults, and legal disputes.
Natural Disasters:
Australia is no stranger to natural disasters, from bushfires and floods to severe storms. These incidents can cause significant damage to your rental property, resulting in expensive repairs and renovations. Landlord's insurance can cover the cost of repairs and other expenses, such as temporary accommodation for tenants.
Tenant Defaults:
Tenant defaults are another common problem faced by landlords. When tenants fail to pay rent, it can cause significant financial loss, especially if you have multiple properties. Landlord's insurance can provide financial protection by covering the rent arrears and legal fees.
Legal Disputes:
Landlords can also face legal disputes, such as evictions, personal injury claims, and property damage claims. These legal disputes can be costly and time-consuming, with legal fees and court costs quickly adding up. Landlord's insurance can help cover the cost of legal fees and any damages awarded to the claimant.
Liability Protection:
Liability protection is also a crucial aspect of landlord's insurance. If someone is injured on your rental property, you could be held liable for their medical expenses and other damages. Without insurance, this can be a significant financial burden. Landlord's insurance can provide liability coverage to protect you from costly lawsuits and legal fees.
While landlord's insurance is not legally required in Australia, it is highly recommended. Without insurance, landlords could end up paying thousands of dollars out of pocket for repairs, rent arrears, legal fees, and other expenses. Landlord's insurance can provide peace of mind and protect landlords from unforeseen circumstances.
The cost of landlord's insurance varies depending on the level of coverage required, the value of the property, and other factors. However, the cost of insurance is often less than the potential financial loss caused by unexpected events. It's also worth noting that the cost of landlord's insurance is tax-deductible.
Landlord's insurance is an essential investment for any landlord in Australia. It provides coverage for a wide range of incidents that could cause significant financial loss. From natural disasters and tenant defaults to legal disputes and liability protection, landlord's insurance can provide peace of mind and financial protection for landlords. So, if you're a landlord in Australia, make sure you have the right coverage in place to protect your investment.