Canberra has overtaken Sydneyas the most expensive capital city across Australia in which to rent a house after Sydney experienced its first annual decline in house rents in more than 12 years.
Median weekly asking rents for houses in Sydney fell 1.8 per cent to $540 over the December quarter with landlords in the west and south-west suffering from the biggest blow, according to Domain’s latest rental report.
Canberra prices have risen 3.7 per cent over the year, with asking rents for houses now at $560 per week – the most expensive in the country – and an 8.1 per cent increase to unit rents now sitting at $465.
“There are a combination of factors in Canberra that have created heated conditions for tenants: higher holding costs through an increase of land taxes and rates, heightened pressure from the demand side as graduates start new jobs and the university year begins as well as a little bit of impact from the ACT government’s Mr Fluffy (loose-fill asbestos) buyback scheme with owners renting while their houses are being rebuilt,” Domain’s senior research analyst Nicola Powell said.
Deirdre Molloy, who recently moved to a terrace in Sydney’s inner west, where prices have fallen 2.3 per cent over the year, said tenants had slightly more leverage than normal to negotiate with landlords but the minimum standard of quality for properties on the market was still very low.
“It’s certainly a reason in my social circle to leave Sydney, because it doesn’t matter if rents have stopped going up at a ridiculous rates, it’s still one of the most expensive places in the world, especially for the quality you’re been given,” Ms Molloy said.
House rents in Sydney’s west fell the most over the quarter, dropping 2.2 per cent, while units in the south-west fell 2.6 per cent, according to Domain, which is majority owned by Nine, publisher ofThe Australian Financial Review.
“We’ve noticed rents have probably come back by $10 or $20 a week but that’s not across the board. It’s those properties that aren’t as well presented that have to adjust in price a bit, and that’s because of an increased supply level,” Starr Partner Auburn director Greg Okladnikov said.
“We’ve noticed a lot of granny flats coming onto the market place as well as units, but landlords with things that tenants want like properties close to the station, air-conditioning, or a second toilet, for example, are still OK,” he said.
Rents for houses increased in every other capital city over the December quarter except in Darwin where prices were flat at $500 per week, but down 9.1 per cent over the year from $550.
Sydney was the only capital city where unit rents fell over the quarter, by 2.8 per cent, while prices in Melbourne, at $410 per week, Perth at $300, and Darwin, at $400, remained flat.
Landlords of units in the three capital cities to have defied the housing downturn in 2018 continued to demand more rent with asking prices increasing over the quarter by 8.6 per cent in Hobart and 3.3 per cent in Canberra and Adelaide.
Melbourne yielded a surprise result with asking rents for houses rising over the quarter by 2.3 per cent to $440, which Dr Powell attributed to underlying demand for rentals as a result of strong population growth.
“It is a little surprising but that pace of rental growth is lower relative to the same period last year, so there is certainly heat that has come out of the market,” she said.
Perth is the cheapest capital city for tenants to live in with asking rents for houses at $360 per week, up 2.9 per cent over the quarter, and $300 for units.
Sydney unit rents, which had declined for two consecutive, are now back to 2017 levels but Leo Patterson Ross, of the NSW Tenants Union, said without a rise in wages it wasn’t a significant increase in real terms.
“Obviously rents coming down will slowly make things easier for tenants but they have a long way to come down before they are properly affordably,” Mr Patterson Ross said.
“The industry usually refers to a3 per cent vacancy rate as equilibriumbut I suspect a good vacancy rate would be 5 per cent, at which point it would shift to a renter’s market.
Gross rental yields were strongest in Canberra with units garnering a return of 6.02 per cent while houses in Hobart commanded a yield of 5.08 per cent.