An anemic supply of rental housing led to a “dramatic” annual rent increase in September.

According to CoreLogic, the nationwide median rent grew 8.9% year-over-year, the highest rate since July 2008.

On a quarterly basis, rental growth in September was slightly lower compared to the previous period, at just 1.9% more than the 2.1% recorded in the June quarter.

Despite this increase in rents, rental yields are on a downward trend.

In fact, national rental yields have declined monthly since October last year, with the latter at 3.29%.

This downward trend was visible in capital cities and regional markets.

Combined gross rental income decreased to 3.02% for capital cities and 4.35% in regional cities.

The compression of rental income despite the increase in rents can be attributed to the increase in the value of the house.

While national rents rose 1.9% in the quarter, home values ​​rose significantly faster at 4.8%.

Still, the rental yields of Australia and most of its capital cities remain in the healthy range of 3% to 5%.

However, that was not the case for Sydney and Melbourne, where rental yields were 2.45% and 2.76% respectively in September.

Here is a breakdown of gross rental income by capital cities and home type:

However, that was not the case for Sydney and Melbourne, where rental yields were 2.45% and 2.76% respectively in September.

Rents are rising faster in regional markets

The regional markets outperformed the capitals in both monthly and annual rental gains.

Over the month, combined rental growth increased by 1.7% for capitals and 2.2% for regional markets.

The difference was greater year on year: regional rents rose by 12.5%, while capital rents rose by only 7.5%.

Brisbane and Sydney recorded the highest quarterly rental growth rates among capital cities at 2.6% and 2.3% respectively.

Despite the gains, Adelaide remained the cheapest capital for rents of $440 per week.

On the other hand, Canberra maintained its status as the most expensive market where houses are rented for a median of $633 weekly.

The regional markets outperformed the capitals in both monthly and annual rental gains.

Factors Influencing Rental Growth

CoreLogic’s research director, Tim Lawless, said the rent increase can be attributed to several factors, including increasing demand for detached homes and the lack of supply.

“Renters are clearly looking for lower-density housing options, with house rents rising more than double the unit rents in the past year,” he said.

It is worth noting, however, that the trend is starting to weaken, with national house and unit rents rising at the same pace in the September quarter by 1.9%.

“Another factor that may contribute to rental demand is that more tenants are working from home, which could fuel a trend towards smaller rental households as tenants want to maximize their space and work environment during COVID,” said Mr. Lawless.

Photo by CHUTTERSNAP on Unsplash.

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