Rent prices in Melbourne and Canberra are the highest they’ve ever been, with the latter making its mark as the strongest rental upswing since 2007, according to the Domain Rent Report for the December quarter.
In Canberra, the median rent for houses is at $675 per week, up 4.7% over the quarter and 12.5% over the year, while the median rent for units is at $530 per week, up 1.9% over the quarter and 7.1% over the year. This makes Canberra the most expensive city to rent in across the country.
Joel Dignam, executive director at Better Renting, said it was still a landlord’s market, leaving low-income earners little to no room for negotiation. Typically, low rental vacancy spells out good returns for investors but terrible fortunes for tenants.
Canberra, Sydney and Melbourne have rental vacancy rates of 1%, 2.6% and 3.2%, respectively – to be considered a landlord’s market, the figures must remain below 3%.
“Landlords are still in a strong position when it comes to having a range of tenants to choose from and knowing that there’s very little chance of a long vacancy compared to a tenant who’d often have to spend every free moment inspecting a number of properties just to find a place,” Dignam said.
Nicola Powell, chief of research and economics at Domain, said the Canberra results are highly influenced by seasonal change, which means rent prices could settle in the months to come.
“The tail end of the year to the start of the new year is usually a busy period in the rental market so when you look at a landlord who now has a vacant property on the market, they will align the rent price to the current market rate,” Powell said
However, there seemed to be a mismatch between asking rent price and gross rental yield in Canberra. With the former at its peak, the latter has experienced its lowest rate ever at 3.7%, falling 1.2% over the quarter and 11.% over the year.
Sydney emerged as the second-most expensive rental market, with houses and units priced at $600 and $490 per week, respectively. This could be explained by its “less interrupted” economy that managed to keep lockdowns to a minimum, retaining people in a traditional work arrangement.
Only Melbourne seemed to be a capital market exception. Interestingly, it recorded its highest rent growth, but it stayed as the cheapest of the major cities, with other smaller cities like Adelaide outpacing its median rent price of $445 for houses and $375 for units per week.
“People have been able to get a larger rental that they couldn’t afford before,” Powell said.
Matthew Hassan, senior economist at Westpac, the Melbourne market has balanced from the excess stock of those leaving home to pursue a tree or sea change, among other factors.
“The rental market in Melbourne still has an overhang of stock, but that’s very likely to be in particular parts of the city,” Hassan said. “The rise in rents would be more in the middle or outer suburbs – areas where you can work from home in beautiful surroundings or go to the office in the city if you need to.”
