Rents Increasing At Fastest Rate In 14 Years | Kanebridge News
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Rents Increasing At Fastest Rate In 14 Years

With regional areas outpacing the capital cities.

By Terry Christodoulou
Tue, Apr 27, 2021 11:09amGrey Clock < 1 min

It’s not only homebuyers feeling the pocket pinch with rental rates surging by 3.2% nationally.

According to Corelogic’s Rental Review for the March 2021 quarter, the drivers of growth are diverse with the regions, Darwin and Perth collectively driving much of the increase.

Across combined regional markets, rents rose 4.1% in the first quarter of 2021 according to the report. Elsewhere rents in the combined capitals increased 2.9% by comparison.

Regional units recorded the highest quarterly rental growth of 4.8%, compared to the 2.0% rise in capital city units.

Further, capital city house rents were up 3.3% while regional houses rose by 4.0% during the period.

Darwin has shown the strongest growth in rental rates over the quarter, up 8.2% and 7.0% respectively.

Across the spectrum, Melbourne recorded the weakest growth in rents over the three months to March with house rents up 1.6%, while unit rents were unchanged over the quarter.

CoreLogic’s Research Director Tim Lawless, says “While housing rents are rising at the fastest pace since 2007, the headline reading hides the sheer diversity of rental conditions around the country. At one end of the spectrum we have Perth and Darwin where annual rental growth is well into double digits and accelerating. At the other end is Melbourne and Sydney where rents are down over the year.

“Although rents are generally rising, housing values have been rising at a faster rate which has seen rental yields compress across most of the capital cities. The exceptions are Perth and Darwin where rents have risen at a faster pace than housing values, driving a rise in yields. The opposite is true in Sydney and Melbourne where rental yields are plumbing new record lows,” added Mr Lawless.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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