Rental growth to keep pace with house price growth over next two years led by WA: NAB survey

Landlords can expect rents to rise at the same pace as house prices over the next two years, but with wide variance across state markets with WA the strongest and Victoria the weakest rental market.

Overall the expectations are for slightly stronger rental growth over the next two years than forecast three months ago.

Rents are forecast to rise 3.6% over the next two years matching house price growth expectations, according to the March quarter NAB residential property survey.

Rental expectations for the next 12 months have risen slightly since the December quarter survey.

Survey respondents – a pool of 300 mainly estate agents, property owners and investors – now anticipate rents to rise 2.6% to March 2014 compared with previous expectations of a 2% year-on-year rise.

As with house price expectations, rental growth is likely to be strongest in WA with a rise of 4.2% forecast.

In South Australia/Northern Territory, expectations were revised up sharply to 3.9% (compared with a small decline of 0.5% previously).

However, report author and NAB chief economist Alan Oster, notes that “this series is generally more volatile because of a smaller sample size.

“Upward revisions were also apparent in all other states, led by Queensland (2.4% from 0.6% previously) and NSW (2.4% from 1% previously).

“Rental expectations for the next year were weakest in Victoria at 1.6%, but marginally higher than 1.4% forecast in the December quarter,” Oster says.

Over the next two years, national rents are forecast to grow 3.6%, up slightly from an earlier forecast of a 3.3% rise, “reflecting more bullish results from SA/NT (5.2% from 1.1% previously) and NSW (3.4% from 3% previously).

Expectations were broadly unchanged in WA (5.3%) and Victoria (2.6%), but were downgraded slightly in Queensland (3.3% from 3.6% previously).

The survey found that rental markets are still “generally tight across the country” with national rents growing 1% in the first quarter of 2013.

The rental market was strongest in WA, where rents grew 2.4% in the March quarter compared with 1.9% in the December 2012 quarter “as the resource led surge in population growth supports strong tenant demand”.

Rental growth was slowest in Victoria at 0.3% where the residential vacancy rate was also the highest in the country in February according to SQM Research data, but this was also the first positive result since the December 2011 quarter.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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