Lukewarm rental figures reveal the truth behind so-called dwelling shortage crisis: Terry Ryder
There’s been so much chatter about prices lately that everyone has forgotten about rentals.
Fortunately, the publication of Australian Property Monitors’ quarterly rental report has given the real estate media something new to talk about – but, given that the results for Sydney (centre of the universe) and Melbourne (deputy centre of the universe) are quite muted, it’s likely that media won’t discuss it at all.
Can you have a rental bubble? No? Then it’s hardly worth bothering with, is it?
The message about big city rentals in recent times is that Perth and Darwin have had massive increases for both houses and apartments, while the other six capital cities have had no growth at all to speak of.
The rental report for the September quarter has continued this pattern, except that the level of growth in Darwin and Perth has moderated considerably.
According to APM’s report, the median house rent for Perth has dropped in the latest quarter, so the annual rise has come back to 6.7%. There has also been a quarterly decline in the median rent for apartments, so the annual rise is now 10.5%. Those 12-month increases still sound substantial, but are well down on the figures from other periods over the past year or so.
It’s similar with Darwin. The median apartment rent is 7.7% up on a year ago, but it’s not so long ago that the annual rise was above 20%. And the median house rent is now down 2.9% in annual terms.
But Darwin still has the highest median rents in capital city Australia, by a considerable margin - $680 a week for houses and $560 a week for apartments. You have to go to mining towns to find bigger weekly rents that Darwin’s.
Rents haven’t done much in Sydney and Melbourne. You would expect Sydney rents to be rising strongly, given constant media talk about a shortage of dwellings. But there has been no change at all in the median house rent in annual terms and only a moderate (4.3%) rise in the median unit rent.
How can that be, when the market is “white hot” and there’s a chronic housing shortage crisis? The answer is that the shortage is a myth and the market overall is lukewarm only (looking across the whole city, rather than media’s narrow focus on the auction frenzy suburbs).
In Melbourne median rents for both houses and units have risen less than 3% in annual terms. Brisbane’s median house rent is up 3.9% and the median unit rent only 1.4% and Adelaide in even more subdued.
Rents are down quite markedly in Canberra, according to APM’s figures, which is unsurprising in a city where the Abbott axe hangs above so much bureaucratic heads (and there’s an over-supply of apartments).
Equally unsurprising is the decline in Hobart, which is capital of Australia’s economic basket case.
Overall, it’s a pretty mediocre result for residential rents. APM’s senior economist Andrew Wilson argues that rental growth is subdued because more people are buying – but, given the low activity among first home buyers, I’m not sure that this is the reason.
I think rental growth has continued to be muted because the much-trumpeted housing shortage exists only in the minds of the boffins at the Housing Industry Association and those who believe their propaganda.
Terry Ryder is the founder of hotspotting.com.au and you can contact Terry via email or on Twitter.