Hobart and Canberra: Australia’s new investment hotspots?

Rental growth in Australia remains at its weakest in 10 years, confirm the latest statistics from CoreLogic RP Data.

Photo: 8LettersUK

When it comes to Australia property investment, there are two main players that are dominating the field: Sydney and Melbourne.

Over the last five years, the two cities have seen their house prices surge by 62.3 per cent and 38.1 per cent respectively, far ahead of all the other capital cities, none of which have recorded growth of over 20 per cent since 2011.

Total returns have also been much stronger, according to CoreLogic data. However, rising capital growth is also beginning to impact the yields available to investors. And for investors, overall returns are an important consideration that can be easily overlooked in favour of house prices.

Indeed, while house price growth varies between the capital cities, CoreLogic’s Accumulation Index shows that the total returns from residential property are positive across all capital cities, despite prices going down in Perth and Darwin. Sydney and Melbourne, meanwhile, have seen their yields fall to record lows.

Hobart and Canberra, however, may be looking more attractive, as they offer higher rental returns, but are also seeing prices grow at a moderate, yet accelerating, pace.

“With Sydney and Melbourne having seen much greater value growth than all other capital cities over recent years and rental returns pushing to lower level, the total returns on offer in Hobart and Canberra are likely to remain attractive for investors,” concludes the report.

“Little scope” for landlords to raise rents in Australia

There is “little scope” for landlords to raise rents in Australia, due to the current market climate, says CoreLogic.

The company’s latest research shows no sign of rental rates lifting over July, with rental rates dropping in all cities except for Melbourne and Hobart.

CoreLogic’s rental index fell 0.3 per cent month-on-month and 0.6 per cent year-on-year in July 2016. Combined capital city median weekly rents are at $483, their lowest since December 2015. In contrast, this time last year, capital city rental rates had increased by 0.9 per cent. (Combined capital city rental rates are at $485 per week for houses and $467 per week for units.)

“It is anticipated that the rental market weakness will persist and that on an annual basis rents will continue to fall over the coming months,” forecasts Research Analyst Cameron Kusher, who attributes the decline partly to growing levels of supply.

However, there are multiple other factors at play, including the softest wages growth on record, high levels of construction and housing investment, as well as slowing population growth.

“Once again the combination of all these factors means that landlords have little scope to increase rental rates in this current market,” says Kusher. “Potentially, the changing rental market conditions will have a flow on effect for older stock, particularly units given we’re seeing so much new unit supply being added to the rental market, much of which is located in inner city locations.”

As a result, gross rental yields are at record lows, with investors focusing on capital growth for their returns.

Weak rents forecast to continue in Australia

20th May 2016

The weakness in Australia’s rental market is forecast to continue over 2016 by CoreLogic.

The firm’s latest monthly rental review shows that rents increased slightly in April by 0.1 per cent that capital city rents slipped 0.2 per cent on an annual basis.

Rental rates are currently $490/week for houses and $467/week for units across combined capital cities, with five of the eight cities seeing a “modest” rise in rents over the past 12 months: Sydney (1.4 per cent), Melbourne (1.7 per cent), Adelaide (0.5 per cent), Hobart (1.1 per cent) and Canberra (2.5 per cent). Perth and Darwin, however, saw large drops of 8.9 per cent and 12.6 per cent respectively, pulling down the combined capital average.

Research analyst Cameron Kusher predicts that rents will continue to fall over the coming months.

“The annual change in rental rates continues to be at its slowest pace since before 1996,” he comments. “At the same time last year, rental rates increased by 1.7 per cent, which indicates a sharp slowdown in rental growth over the past year.”

Factors contributing to a slowing in rental growth include falling real wages, excess rental supply in certain areas and lower rates of population growth, all of which have impacted on demand for rental accommodation.

Australian rental growth at weakest in 10 years

17th March 2016

Rental growth in Australia remains at its weakest in 10 years, confirm the latest statistics from CoreLogic RP Data.

The report confirms that over the coming months rental rates could begin to fall on an annual basis due to additional new rental supply entering the market.

Capital city rental rates continue to record no change over the year, with weekly rents across the combined capital city up just 0.3 per cent in February 2016 on a monthly basis.

Melbourne is the strongest of the weak bunch, with rental rates up just 2.2 per cent year-on-year, ahead of Sydney (1.5 per cent), Canberra (1.6 per cent) and Hobart (0 per cent). The growth in each capital city, though, is well below their decade average levels, notes CoreLogic. Rents fell over the year, meanwhile, in Brisbane (down 0.7 per cent), Adelaide (0.4 per cent), Perth (8.4 per cent) and Darwin (13.3 per cent).

“The cause of this current slowdown in rental growth is falling wages, excess rental supply in certain areas and lower rates of population growth and population mobility impacting on demand for rental accommodation,” says research analyst Cameron Kusher.

Australian rental growth slows to record crawl

17th July 2015

Rental growth in Australia’s capital cities has slowed to a record crawl, providing much needed relief for tenants.

Monthly analysis from CoreLogic RP Data shows that rental rates across the combined capital cities fell by 0.2 per cent in June 2015, taking the annual rate of growth to a new low.

Rental rates are recorded at $487 per week, up 1.1 per cent over the past 12 months. This rise is the slowest rate of growth on CoreLogic RP Data records, which date back to December 1995.

Research analyst Cameron Kusher attributes the slowdown to the ongoing boom in dwelling construction across Australia’s capital cities, accompanied by record high participation in the housing market from investors. Indeed, both foreign and domestic investors are driving a large proportion of inner city development.

Sydney and Hobart have recorded the greatest increases in weekly rents. Along with Melbourne and Canberra, Sydney is the only city to see rents higher over the past three months.

Sydney and Hobart recorded the greatest annual increases in weekly rents while rents in Perth, Darwin & Canberra continue to decline.