Unit rental growth slows

CoreLogic’s Housing Chart Pack for July highlighted a significant slowdown in annual rental growth across Australia's major cities.

The growth rate fell to 8.6% from a high of 10.6% in April.

“Although rents have not actually declined year-on-year, there is a clear slowing in the pace of annual growth across the large inner-city unit markets of Sydney, Melbourne, and Brisbane,” said Eliza Owen (pictured above), CoreLogic head of research for Australia.

Major cities hit hard

Over the past year, the growth rate in capital city unit rents dropped from 15.1% to 7.6%.

Sydney saw the annual rate of growth for unit rents fall 10 percentage points to 7.1%.

In Melbourne, unit rents dropped 7.4 percentage points to 7.5%, while Brisbane’s unit rent growth slowed from 15.3% last year to 8.5% this year.

Historic averages and demand

Owen pointed out that despite the slowdown, Sydney and Melbourne’s growth rates are still well above historic averages of 2.7% and 2.6% respectively.

“Rental demand is not strong enough to sustain ongoing, double-digit growth across these cities,” she said.

In contrast, annual growth in house rents has increased slightly, and regional rents have also re-accelerated, suggesting a shift in rental demand from city units to houses and regional areas.

Key Insights from CoreLogic's July Housing Chart Pack

• Property values: The combined value of residential real estate rose to $10.8 trillion at the end of June.
• Quarterly growth: The pace of growth eased to 1.8% in the June quarter, down from 1.9% in March.
• Home sales: There were 37,148 sales in June, with an annual count of 508,610, 8.6% above last year.
• Selling time: Properties are selling faster in Perth, Brisbane, and Adelaide compared to a year ago.
• Listings and supply: New listings are 7.8% higher than last year, but total listings are 17.3% below the historic five-year average, indicating persistent undersupply.
• Auction clearance rates: The four-week average auction clearance rate trended slightly lower at 64.2%.
• Rental growth: Annual growth in rent values slowed to 8.2% nationally, with June showing the lowest monthly growth since September last year.
• Dwelling approvals: Unit approvals saw a 14.2% lift in May, suggesting a possible recovery.
• Housing lending: The value of new housing lending fell by 1.7% in May, with investment lending rising to 37.1%.

Outlook on rental market

“The consistent slowdown in growth is an early sign of demand pressures easing in the market,” Owen said. “Clearly, rental demand is not strong enough to sustain ongoing, double-digit growth across these cities.”

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