Australia's residential rental market remained a bright spot for property investors as it posted its highest annual gain in rents since 2008 in July, the latest report from CoreLogic shows.
The annual pace of growth in national rents soared by 7.7%, an indication that rental markets remain tight.
But CoreLogic research director Tim Lawless noted beneath the headline figure, rental conditions remained diverse.
“Rental conditions across Darwin and Perth are the tightest amongst the capitals reflecting low vacancy rates and high rental demand,” Mr Lawless said.
"Both cities saw a substantial reduction in investment activity from 2014 which has likely contributed to the short supply of rental accommodation.”
Over July, house rents increased by 22.7% in Darwin and 16.6% in Perth. The two cities also posted substantial gains in unit rents at 20.3% and 14.6%, respectively.
In our two biggest property markets, annual rental gains were relatively muted, at least for the housing segment. House rents increased by 7.2% in Sydney and 2.8% in Melbourne.
The unit rental market tells a different story, particularly for the Victorian capital. While Sydney rents still increased — albeit only slightly — at 0.9%, Melbourne clocked a decline of 4.9%.
"The good news for landlords is that rental markets in these areas are stabilising following a substantial reduction in rents due to high vacancy rates attributable to stalled overseas migration and a preference shift away from high density living during the pandemic," Mr Lawless said.
How are rental yields looking?
With housing values outpacing rents, gross rental yields have hit a record low of 3.4% in July.
Sydney and Melbourne dragged this result down as their yields fell to 2.5% and 2.8%, respectively.
“Considering mortgage rates on new investment loans are averaging around 2.8%, gross rental yields outside of Sydney and Melbourne are likely to be providing opportunities for positive cash flow investment opportunities,” Mr Lawless said.
“Considering yields outside of Sydney and Melbourne are high relative to mortgage rates and housing values are expected to rise further, we are likely to see investment activity continue to lift.”