CoreLogic’s Housing Chart Pack for July shows that rental price growth in Australia’s major cities is slowing down. Surprisingly, the growth rate for unit rentals decreased from a high of 10.6% in April to 8.6% in June, indicating a big change in the rental market.
Major cities are feeling the impact
The slowdown is most noticeable in the inner-city unit markets of Sydney, Melbourne, and Brisbane. Over the past year, the growth rate in capital city unit rents dropped significantly from 15.1% to 7.6%.
- Sydney: Unit rent growth over the year fell sharply by 10 percentage points to 7.1%.
- Melbourne: Unit rents decreased by 7.4 percentage points to 7.5%.
- Brisbane: The growth rate slowed from 15.3% last year to 8.5% this year.
Despite this slowdown, rental demand in Sydney and Melbourne isn’t strong enough to sustain double-digit growth.
Changes in rental demand
While unit rental growth in major cities is slowing down, other parts of the rental market are moving differently. House rents have slightly increased annually, and rents in regional areas are picking up pace again. This indicates a shift in rental demand from city units to houses and regional locations, likely due to changing lifestyle choices and affordability challenges in urban areas.
Key insights from CoreLogic’s July Housing Chart Pack:
- Property Values: The total value of residential real estate reached $10.8 trillion by June’s end.
- Quarterly Growth: Property value growth slowed to 1.8% in the June quarter, down from 1.9% in March.
- Home Sales: June saw 37,148 sales, totaling 508,610 over the year, an increase of 8.6% from last year.
- Selling Time: Homes are selling quicker in Perth, Brisbane, and Adelaide compared to a year ago.
- Listings and Supply: New listings rose by 7.8% from last year, but total listings are 17.3% below the five-year average, indicating ongoing undersupply.
- Auction Clearance Rates: The average auction clearance rate over four weeks slightly declined to 64.2%.
- Rental Growth: Annual rent growth slowed to 8.2% nationwide, with June marking the slowest monthly increase since September last year.
- Dwelling Approvals: Approvals for units rose by 14.2% in May, hinting at a potential recovery.
- Housing Lending: New housing lending decreased by 1.7% in May, while investment lending increased to 37.1%.
Outlook on the Rental Market
Experts believe the ongoing slowdown in rental growth shows that demand pressures in the market are easing. It’s clear that rental demand isn’t strong enough to keep double-digit growth going in these cities. As rental growth slows in major cities, it’s important to watch how these trends develop and what they mean for Australia’s overall housing market.
The shift in rental demand from city apartments to suburban houses and regional areas could change the housing market, influencing property values and investment plans. Staying informed and flexible will be crucial for everyone involved in navigating these shifts.
Conclusion
CoreLogic’s latest report reveals a significant slowdown in unit rental growth across major Australian cities, indicating reduced demand. As rental preferences shift towards houses and regional areas, stakeholders should stay flexible to adapt to changing market conditions and opportunities.
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