Capital cities hit hard as rental yields fall in June quarter: CoreLogic 2020 quarterly rental review

Nationally, rent values declined 0.3% in the month of June and 0.5% over the quarter, according to the latest findings from CoreLogic.

This was the largest quarterly fall in rents since September 2018, and the CoreLogic June 2020 quarterly rental review predicts a further downturn in the coming months.

Eliza Owen, head of CoreLogic’s research in Australia, said that the decline in rent values over the quarter came at a time when the rental market was already relatively weak.

“Annualised growth in national rent values was just 1.1% in the five years to June 2020, compared with annualised growth in the selected living cost index of 1.4% in the 5 years to March for employee households", Owen says.

"In other words, rents have generally seen softer growth than the growth in general cost of living for most households.

“Prior to the fall in rent values over the June quarter, growth in rents had seen some momentum building, with the national CoreLogic rental index recording consecutive increases between September 2019 and March 2020.

"These signs of rebounding rent values came as investor participation in the market was falling from 2017, and subsequently, the rate of new supply additions in rental properties had been falling.”

Capital city rental yields have been more profoundly and immediately impacted by the negative economic shock resulting from COVID-19.

Capital city rents fell 0.7% in the June quarter, compared with a 0.2% rise in rents across regional Australia.

COVID-19 has pivoted the trajectory of rental market performance, with six of the capital city dwelling markets seeing a quarterly decline in rental values.

The Hobart rent market had the largest value falls in the June quarter at 2.3%, followed by Sydney at 1.3%.

Four of the eight capital cities saw no growth or falls in rent values over the year to June.

Perth and Adelaide still saw growth in rent values over the year, at 2.2%.

The narrow differential between Sydney and Canberra rents continue, despite the COVID-19 downturn.

Estimated median asking rents in Sydney fell 1.6% in the June quarter, against a 1.7% decline in Canberra rents.

Sydney remained the more expensive in terms of median asking rents, at $568 per week.

This was just $2 higher than the estimated median asking rent in Canberra.

Gross rental yields were 3.73% nationally in the June quarter, down 3 basis points over the March quarter and 41 basis points over the year.

In the 12 months to June, rental yields fell across seven of the eight capital city markets. Perth was the only exception, where yields increased a modest 3 basis points over the year.

In the June quarter of 2020, regional rental yields slipped 3 basis points to 4.93%.

The combined capital cities regions fell 2 basis points in the quarter to 3.44%.