Over the 12 months to September 2009 weekly rents for houses nationally have increased by 3.4% and units have witnessed a slightly greater rate of growth at 4.1%. Compared to recent years, these results reflect a slower rate of growth. In most areas, rents have actually shown modest falls in recent months as value growth has returned to the market and rental growth has failed to keep pace. Also, first home buyer activity has eased some of the pressure on the rental market as renters became first home buyers.
With the First Home Buyers Grant Boost being wound back and mortgage rates rising it’s anticipated that more people will be forced to remain in the rental market. The impact is likely to be that rental rates will once again start to climb, especially given that nationwide our annual new dwelling requirement continues to go unfulfilled.
Across the housing market nationally, Rose Bay in Sydney’s Eastern Suburbs has witnessed the greatest annual growth in house rents at 58.3%. Over the 12 months, median weekly advertised rents increased from $600/week to $850/week.
The top five list sees a fairly even split between high and low priced suburbs making the list with many New South Wales, Victorian and Western Australian suburbs having higher price tags while other states recording a mixture of higher and lower priced stock.
A trend of note is that most of the best performing suburbs are situated within the capital city regions in fact, 29 of the 40 suburbs listed are within capital city markets. Those suburbs located outside of the capital city are generally situated in or close to larger regional markets, the exceptions are: Gunnedah in New South Wales and the Queensland mining and resource areas of Blackwater, Dysart and Moranbah.?? Across the unit market, West End in Brisbane has seen the greatest jump in median weekly advertised rents, increasing by 39.4% from $330/week to $460/week.
The vast majority of suburbs with the greatest annual growth in rents for units have witnessed this growth across lower priced stock with the only exception being Western Australia. ??Similar to the results for houses, the vast majority of top performing suburbs for units were situated within capital city markets with 32 of the 40 suburbs listed located in these regions.
Importantly, units are generally not as widely dispersed throughout the country and tend to only be available in capital cities, major regional markets, holiday coastal areas and some coastal towns.
There are many reasons why individual suburbs may see a large increase in median weekly advertised rents over a 12 month period. Some of these may include: a dramatic change in housing stock and quality, housing undersupply coupled with increasing demand or a shift from ownership to rentals.
An example of improving housing quality is likely to have occurred in West End with new unit stock injected into the market, while increasing demand in mining and resource towns such as Dysart, coupled with a housing undersupply, is likely to have driven up rents in these areas.
Finally, an area like Bronte has seen house prices fall 19% over the year however, it remains popular. It is likely that some residents have moved into the rental market rather than the housing market in order to enjoy the benefits of living in the suburb without having to service the mortgage. Also, some owners may have had to sell due to the economic downturn but still wish to remain in the suburb and renting is currently their best option.
Tim Lawless is the Director of Property Research at RP Data.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
