Little sign rental growth will pick up anytime soon

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January was a tough month for landlords in a number of real estate markets across Australia, with analysis revealing rents fell in three capital cities during the first month of the year.

According to CoreLogic RP Data’s January rent review research, the combined capital cities only saw rental growth of 0.2% during January, with rents falling in Brisbane (0.2%), Perth, (0.5%) and Darwin (0.4%).

Melbourne recorded the highest rate of rental growth over the month, with a 0.4% increase during January, while rents grew in Hobart by 0.3%.

Rents increased in both Adelaide and Canberra by 0.2% over January, while Sydney saw a 0.1% increase.

In the 12 months to January, there has been no movement in the combined capital cities rental grow, with rents lower in than they were 12 months ago in four of the eight capital cities.

Darwin and Perth are unsurprisingly home to the largest annual decreases in rents, home to year-on-year falls of 13.4% and 8.6% respectively, while rents are down 0.7% and 0.4% respectively in Brisbane and Adelaide respectively.

Melbourne is home to the highest rate of rental growth in the past 12 months at 2.1%, followed by Canberra at 1.8%.

In the same time, rents have grown 1.4% in Sydney and 0.1% in Hobart.

In the 12 months to January rental yields are lower in all capital cities, with Darwin home to largest fall of 0.7%.

Source: CoreLogic RP Data

Cameron Kusher, research analyst at CoreLogic, said the lacklustre conditions in the rental market are the result of a range of different factors.

“CoreLogic RP Data has tracked annual rental changes since 1996 and over that time, rental growth conditions have never been weaker. At the same time last year rental rates had increased by 1.7% highlighting that the slowdown in rental conditions has been sharp over the year," Kusher said.

“A combination of factors is affecting the national rental market. Among these is a higher level or rental stock resulting in greater options for renters, a slowdown in population growth, higher than normal investment activity and stagnant wage growth,” he said.

“More rental stock at a time when demand is easing due to slowing population growth, and little wage growth for renters, has resulted in flat rental growth conditions over the past year."

Increased stock is having a pronounced effect Kusher said, with the possibility that yearly rental growth could soon fall into negative territory.

“For renters there is a lot more accommodation options in the market while simultaneously, landlords are now required to respond to a more competitive environment which, in many cases means keeping rents steady or in some areas reducing rents in order to keep a tenant.

“It is possible that over the coming months, rental rates could begin to fall on an annual basis due to additional new rental supply entering the market.”

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