New data reveals record yields in Australian rental markets in 2022 | Kanebridge News
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New data reveals record yields in Australian rental markets in 2022

The best performing cities for investors may not be where you think

By Robyn Willis
Wed, Jan 11, 2023 10:05amGrey Clock 2 min

The Australian rental market achieved record growth over 2022 as yields go from strength to strength, CoreLogic reports.

While CoreLogic’s Quarterly Rental Review for Q4 2022 showed a slowdown in the pace of growth for the second consecutive month in December last year, rentals experienced a record 10.2 percent increase over the year. 

The December results are just the latest markers of a rental yield upswing, which has seen values rise 22.2 percent since September 2020, the largest upswing on record. It has taken the national median weekly rent valuation from $430 to $519.

Author of the report and CoreLogic head of research, Eliza Owen, said December figures revealed a 2 percent increase, down from a 2.3 percent increase in the September quarter, coinciding with a lift in the rental vacancy rate to 1.17 percent.
“The decline in quarterly rental growth rates observed in the December quarter was led by the capital cities where rents continued to increase but at a slightly slower rate than they have done in September and June quarters,” she said. 

In the capital cities, Canberra still holds the top position as Australia’s most expensive city to rent, with a median weekly rental value of $681, edging out Sydney at $679 per week, followed by Darwin at $579 per week.

At the other end of the scale, Melbourne maintains the title of Australia’s most affordable rental capital at $507 per week, followed by Adelaide on $518, Hobart on $552, Perth at $553 and Brisbane at $588.

Ms Owen points to shifts in migration patterns in recent years to explain the disparity between the country’s largest capitals and Canberra, which reveal a weakening trend for new arrivals in Canberra compared with Sydney and Melbourne.

​“Unlike Canberra, high levels of net overseas migration to NSW and Victoria has vastly offset negative net internal migration flows in the year to June 2022,” Ms Owen said. “Prior to the pandemic, Sydney and Melbourne alone accounted for around two thirds of net overseas arrivals, with high density city centres being among the most popular destinations. This has likely contributed to unprecedented annual growth in unit rents over 2022, which was 15.5 percent  across Sydney and 14.2 percent in Melbourne.” 

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Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet tomorrow for the first time this year.

Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggests that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This would allow the RBA to step back from further rate rises for the next few months as it assesses the impact of tightening monetary policy on the economy.

The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.

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Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.

“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said. 

“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again. 

“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”

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