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The decline in housing values and the increase in rents have resulted in gross rental yields recovering from recent record lows.

According to CoreLogic, gross rental yields across the combined capitals rose 3.5% in November, up from a recent low of 2.96% in February.

However, the current figure is still 17bps below the decade average of 3.67%.

Across regional Australia, gross yields are also on an upwards trajectory — from a recent low of 4.04%, the rate hit 4.42% in November. This, however, is still down 59bps from decade average.

Rental markets across Australia remained extremely tight in November, with vacancy rates holding around 1% or lower in most regions.

The low vacancy rate has been driven by a combination of low rental supply, rising rental demand, and strong rebound in net overseas migration.

In fact, the number of capital city homes advertised for rent reached a decade-low through November and regional rental ads have not been this low since 2009.

Meanwhile, net overseas migration has bounced back rapidly, reaching record highs in some states through the first quarter of the year — a trend that has likely increased further since that time.

Despite these competitive conditions, some evidence suggest that rental growth is easing across some cities.

Recent data showed that capital city rental growth peaked at 3.1% in July and has since reduced to 2.5%.

CoreLogic research director Tim Lawless said the softening in rental growth was more apparent for houses than units.

“This could be a sign that rental demand is transitioning towards more affordable rental options such as the higher density sector,” he said.

There may also be some easing in the detached house segment as the large backlog of housing construction projects are completed.

“It could also reflect a reversal of the pandemic trend towards smaller rental households — as tenancy costs rise and renters struggle with affordability pressures, it’s logical that households would seek to maximise the occupancy of the dwelling in order to spread higher rental costs across a larger number of tenants,” Mr Lawless said.

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Photo by 89Stocker on Canva.