Rental yields hit record low as Melbourne apartment rentals see recovery: CoreLogic

COVID restrictions such as international border closures have played a role in compressed yields

Rental yields hit record low as Melbourne apartment rentals see recovery: CoreLogic
Rental yields hit record low as Melbourne apartment rentals see recovery: CoreLogic

National gross rental yields fell to 3.22% in December, down from September's 3.29% and the 3.71% a year ago.

The 2021 December quarter was a new record low as growth in dwelling values continues to outpace rental growth, according to CoreLogic.

Over the fourth quarter, national dwelling values recorded a 3.9% rise, while rental values increased by 1.9%.

Across the capital cities gross rental yields fell below 3% for the first time in October (2.99%), falling further to 2.96% in December.

It was 3.42% this time last year.

Across regional markets the yield sat at 4.15% in December 2021, down from 4.35% the previous quarter and 4.83% a year earlier.

"COVID restrictions such as international border closures, and disruption to employment across sectors such as tourism and hospitality, which have a relatively high proportion of renters, have played a role in compressed yields," CoreLogic Tim Lawless said.

Sydney and Melbourne have the lowest yields of any capital city at 2.42% and 2.74% respectively while Darwin has the highest at 6.05%, followed by Perth (4.37%).

Brisbane recorded the largest quarterly decline falling to 3.66% in December, in part due to its 8.5% rise in values over the same period.

Brisbane was the strongest performing rental market amongst the capitals over the quarter, rising 2.3%, followed by Canberra and Hobart, both rising 2.1%.

Despite recording the strongest annual rental growth (15.2%), the Darwin rental market was the worst performing over the quarter, with rents rising 0.6% over the three months to December.

Canberra remains the most expensive capital city rental market, with typical dwellings renting for $651 per week, followed by Sydney ($604p/w), Darwin ($561p/w), Hobart ($521p/w) and Brisbane ($507p/w).

Adelaide remains Australia’s most affordable capital with a median dwelling rent of $447 per week, followed by Melbourne at $456 per week.

Melbourne’s rental growth trends shifted in December, as units recorded the strongest rental growth in the country, up 1.6%.

Lawless says Melbourne’s rents remain 5.5% below the record highs of July 2019, however any recent momentum in unit rental growth could represent a recovery trend, underpinned by affordability constraints.

“Brisbane’s rental market for houses has shown strength throughout the pandemic as demand outweighed supply, while Melbourne’s unit market has been weak through most of the pandemic to date due to low demand against relatively high vacancy rates,” Mr Lawless says.

“Melbourne’s unit market is now benefitting from higher demand as more domestic renters seek out affordable housing options in the unit sector. Demand for Melbourne unit rentals is likely to increase more sharply as foreign students and international visitors return.”

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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