Domain has just released its Rent Report for the March quarter, with data showing every capital city in the country except Melbourne, Perth and Darwin hit record highs in the first three months of 2021.
Darwin recorded the biggest quarterly gain in house rents, rising a massive 5.6 per cent over the March quarter and 16 per cent since the same quarter last year.
“It costs the same to rent a house in Darwin and Sydney; rents have not been on par in these two cities since 2017,” Domain Senior Research Analyst Dr Nicola Powell said.
Perth wasn’t too far behind Darwin in the March quarter, recording a 5.11 per cent increase in asking prices for house rents.
Although both cities have yet to reach their 2013 peaks, Darwin and Perth had the biggest bump in median rent increases for houses and units over the past year, with rises of $70 a week in some areas.
According to the Domain Rent Report, Melbourne has become the second-most-affordable capital city to rent in Australia, tied with Perth, with inner Melbourne unit rents dropping by $110 a week.
According to the report, stability has returned to the Sydney rental market in 2021, with house and unit rents holding steady over the March quarter.
The average asking price for houses in the Harbour City remains at the record high of $550 per week, which is 3.8 per cent higher than last year.
Sydney unit rents also held steady at $470 a week over the March quarter.
But despite the relative stability in the unit market so far in 2021, year-on-year they have recorded the steepest annual fall since Domain records began in 2004, falling 9.6 per cent – $50 a week – compared to the same period last year.
Sydney unit rents are currently at the same price levels as 2013 and remain $80 lower than the record high achieved in 2018.
Unit rents have fallen annually since 2018, as increased development and investment activity started to provide greater choice for tenants.
“The pandemic has also created opportunities for tenants to move further afield or become homeowners and reduced rental demand from overseas has weighed more heavily on unit rents,” Dr Powell said.
Sydney’s inner suburbs have been the centre of weak rental conditions, with house rents in the eastern suburbs remaining $100 a week lower than the same period last year and units down $70.
Unit rents in the city and inner south are also down $90 a week and in North Sydney and Hornsby they are down $80 a week compared to the same period last year.
“Sydney’s rental market remains varied depending upon property type and location,” Dr Powell said.
“House rental conditions are tighter compared to units, and prices have become more competitive in the outer suburbs.”
On the Central Coast, the asking price for house and unit rents have pushed to new highs, and in the Northern Beaches, Sutherland, the outer southwest, outer west and Blue Mountains, houses are also commanding record asking rents.
“A continued improvement hinges on the opening of international borders and the return of overseas migrants and foreign students,” Dr Powell said.
Dr Powell said weak conditions in Melbourne remained evident in the March quarter, with house rents 2.3 per cent lower over both the quarter and the year, dropping to $430 a week.
“The rental market is far from uniform, though; house rents have pushed to record highs in the outer east, south east and Mornington Peninsula,” Dr Powell said.
Unit rents dropped a further $10 over the March quarter to $375 a week, marking four consecutive quarters of declining rents.
The cost of renting a unit in Melbourne has now returned to 2015 levels, which is the steepest annual fall since Domain records began in 2004.
Unit rents are $55 lower than the record high notched one year ago – a 12.8 per cent reduction.
“Weaker unit rents compared to houses have resulted in the largest rent price gap on record,” Dr Powell said.
“For the first time on record, Melbourne is the second most affordable capital city to rent a house, joint with Perth and behind Adelaide.”
Dr Powell said tightening rental conditions in Adelaide and Perth could push rents in those cities higher than Melbourne in the coming months, which would make Melbourne the most affordable capital city to rent.
The report found units in inner-city Melbourne had felt the brunt of the downturn, with prices now at 2010 levels after tumbling by $110 a week, year-on-year.
The report found rent prices in the Queensland capital are currently at record highs, with houses up $15 a week over the March quarter and unit rents holding at last quarter’s record.
Brisbane unit rents are $15 a week higher than the same time last year at $400 a week, while house rents are now at $440 a week. That’s an increase of $30 from one year ago, which represents a 7.3 per cent rise.
“This is the steepest annual increase in house rents since 2008, following three strong consecutive quarters of rent gains.” Dr Powell said.
For the first time in five years, it is now more expensive to rent a house and unit in Brisbane than Melbourne.”
House and unit rents held steady or increased in all regions across Greater Brisbane over the March quarter, apart from unit rents in Ipswich, which dropped $5 a week.
The biggest jump in asking rent was recorded for houses in Brisbane’s north and Moreton Bay North, which experienced the steepest yearly increase since 2008, up 6.8 per cent and 6.7 per cent annually.
“Queensland has always been a preferred destination for those moving interstate. However, the pandemic has made remote working a possibility and may have fast tracked decisions or made a temporary relocation an option,” Dr Powell said.
“More Australians are deciding to relocate to the sunshine state, with the annual number of residents moving from other states into Queensland hitting the highest level since 2006.”
Dr Powell said the Gold Coast and Sunshine Coast rental markets both continued to outperform Brisbane as rents rise at a greater pace.
House and unit rents on both coasts pushed to new record highs over the first quarter of 2021.
“House rents are rising at the steepest pace of annual growth in roughly 15 years,” Dr Powell said.
“Sunshine Coast house rents have surged $80 above last year and $50 higher on the Gold Coast, to $580 and $560 respectively.”
The report found house and unit rents in Adelaide reached record highs in the March quarter, with houses up $15 a week and units experiencing a $10 a week gain.
House rents are now at $425 and unit rents $350 a week, which is the steepest quarter and annual rise in house rents in the city since 2009, up 3.7 per cent and 7.6 per cent respectively.
“Despite rising rents Adelaide remains the most affordable capital city for tenants,” Dr Powell said.
“There is only a $5 difference between house rents in Adelaide and Melbourne (but) if the pace of rental growth continues Adelaide could overtake Melbourne in coming months.”
Adelaide’s vacancy rate has been steadily falling in recent years and hit a multi-year low of 0.6 per cent in March.
According to Dr Powell, the loss of residents interstate had been a drag on the demand for housing in the state for multiple years.
However, with more interstate residents opting to move to South Australia over the past year, net interstate migration has now hit positive territory for two consecutive quarters, the first half-year rise in almost three decades.
“Subdued investment activity and apartment construction in recent years relative to other cities has also limited the rental supply,” Dr Powell said.
Domain’s quarterly report found Perth’s rental market continued to rebound over the March quarter, with tenants now facing the highest asking rents in almost six years.
House and unit rents gained $15 a week over the first quarter of 2021, at $430 and $365 respectively.
“Perth rents have now risen for three consecutive quarters, making the rate of annual hikes the fastest since 2013, at 14.7 per cent for houses and 14.1 per cent for units,” Dr Powell said.
“This is the biggest annual jump in rents of all the capital cities. Perth’s rental market is swiftly recovering, however tenants are still paying well below 2013 peak rents.”
Houses remain $60 lower than at their peak and units are $85 cheaper, although Dr Powell said the gap was rapidly closing.
“In half a year, Perth has moved from the most affordable capital city to more expensive than Adelaide,” she said.
“House rents are now on par with Melbourne.”
Dr Powell said with the moratorium on evictions and rental hikes having now ceased in Western Australia, it could spark further movement from tenants in the market.
“It is anticipated that asking rents will jump in response to tighter conditions, the ending of the rental moratorium and higher demand,” she said.
With net interstate migration to Greater Perth also in positive territory for the first time since 2013, additional demand was likely to be placed on the city’s rental market, Dr Powell said.
Hobart rents rose by $20 over the March quarter, pushing house rents to a record high and units back to the record first achieved one year ago.
House rents are now 2.1 per cent higher than the same period in 2020 and units have held steady, with asking rents for houses now at $480 a week and units $420.
“It was only roughly five years ago Hobart was the most affordable capital city to rent, it is now the fourth-most-expensive to rent a house and unit,” Dr Powell said.
“Hobart’s vacancy rate declined to a tight 0.4 per cent in March, back to levels last seen in 2019 when rents were rising with double-digit percentage growth annually.”
The number of estimated vacant rentals has declined by 38 per cent compared to the same time last year and Dr Powell said as the rental moratorium comes to an end, landlords are likely to adjust rents accordingly.
“However, Hobart’s rental market performance varies depending upon location,” she added.
“House rents in Dodges Ferry, in Sorell, have soared 12.4 per cent compared to the same time last year, however, inner Hobart rents are lower than they were last year, down 2.7 per cent for houses and down 5.6 per cent for units.”
Domain’s report found Canberra remained the most expensive capital city to rent a house or unit, at $600 a week and $500 respectively.
House rents held steady over the quarter but are 3.4 per cent higher than the same period last year.
“Unit rents increased a further $5 over the March quarter, 4.2 per cent higher year-on-year,” Dr Powell said.
“This has pushed the price gap further from Sydney, with Canberra unit rents now $30 more than renting a unit in Sydney.
“It is also $50 a week more expensive to rent a house in Canberra than the next most expensive cities, Sydney and Darwin.”
The vacancy rate fell further in March to 0.7 per cent, similar to the tight rental conditions seen in 2018 when rental prices were rising.
“Tenants will find the task of securing a lease harder, as the estimated number of vacant rentals continues to decline, 14 per cent lower than last year,” Dr Powell said.
“This is during a time Australian expats return, temporary overseas employees extend stays and the city is better placed economically, buoyed by the public sector and industries reliant on government spending.”
“Darwin’s rental market continues to recover, posting the steepest annual gain in rents since 2013,” Dr Powell said.
“House rents have jumped 14.6 per cent to $550 a week and unit rents up 13.2 per cent to $430.”
The rises equate to $70 more a week for houses and $50 more for units than a year ago.
“It costs the same to rent a house in Darwin and Sydney; rents have not been on par in these two cities since 2017,” Dr Powell said.
Although the rental market in the Northern Territory capital has made a swift recovery, house rents remain $150 lower than 2013, with units $140 cheaper.
“Darwin’s gross rental yields are the highest of all capital cities,” Dr Powell said.
“The jump in gross rental yields suggests rents are rising at a greater pace than sale prices. For houses, yields have reached the highest since 2004. For units, yields are at the highest since Domain records began.”
But Dr Powell warned: “The sustainability of Darwin’s rental rebound is questionable considering short-term factors could be driving the revival in rental demand.”