Rents rising in Sydney, Brisbane and Perth but stagnant in Melbourne: Tim Lawless

Rental returns in Sydney, Brisbane and Perth have increased significantly this year while rental growth in Melbourne has been minimal, according to RP Data national research director Tim Lawless.

Average Sydney rents increased 5.9% for houses to $550 a week and 5.4% for units to $513 a week.

The median gross rental yield Sydney houses is now 4.4%, with units yielding 5.2%, both above the combined capital city average.

In Brisbane and Perth house rents increased 4.8% and 10.1% respectively and unit rents went up 8.4% and 6.8% respectively.

In Melbourne average house rents went up just 1.9% while unit rents remained the same.

“The common denominator across Sydney, Brisbane and Perth's strong rental conditions is that new housing supply has been insufficient relative to population growth,” says Lawless, writing in The Sydney Morning Herald.

“The number of dwellings that commenced construction across NSW during the June quarter was just 6,696. [In] Victoria, where housing demand is virtually the same as NSW,… there were 14,684 dwelling starts – more than double NSW.”

This decade NSW had 25% fewer dwelling commencements than the previous decade.

“With the Sydney housing market clearly under-supplied we have seen rental vacancy rates reportedly fall below 1.% and the upwards pressure on rents is likely to persist,” he says.

“This is compounded by the fact first-home buyers represent a fairly small proportion of the market.”

Lawless advises investors seeking maximum rental return to buy where rental demand is likely to be the highest and where there are clear supply constraints.

“Established suburbs close to major working nodes are generally a safe bet, as are suburbs close to universities and major public transport hubs.”