Growth in rents across Australia’s capitals has hit a record low, squeezing property investors who are already contending with decreasing returns and rising borrowing costs.
Real housing rents fell 0.4 per cent for August across Australia’s capitals, according to CoreLogic RP Data, bringing annual growth in rents to just 0.7 per cent for the 12 months to the beginning of September.
The slow growth in rents comes after all of Australia’s major banks began tightening lending to real estate investors. The latest investment figures, released by the Australian Bureau of Statistics yesterday, show a 0.5 per cent monthly gain to $13.59 billion in July, just before banks began introducing higher rates for investors.
The 0.7 per cent rise in rental rates over the past year is the slowest rate of rental growth on record, based on data which goes back as far as December 1995, according to CoreLogic analyst Cameron Kusher.
“The reasons behind this lacklustre result for the rental market can be attributed to the extent of the current construction boom across the capital cities and slowing population growth,” he said.
“Added to this is the surge in investor participation in the housing market, which is contributing to weaker rental growth by adding to the rental stock.”
Sydney rents remained unchanged for the month, with year on year growth at 2.3 per cent. Melbourne recorded a 0.3 per cent fall and Brisbane recorded a 0.4 per cent fall in August, while Darwin fell back 1.7 per cent and Perth rents dropped 1.2 per cent.
Of all Australian capitals, Melbourne has the lowest rental yield, at just 3.1 per cent compared to 3.3 per cent last year. Sydney has an average yield of 3.3 per cent, compared to 3.8 per cent 12 months ago.
This article first appeared in The Australian Business Review