05 Feb Sydney unit rental prices ease – Dr Nicola Powell
Rental prices for the December quarter demonstrated that Australia’s capital city markets are operating on different property cycles, as Sydney unit rental prices ease slightly, while Canberra and Hobart markets continue to grow, according to Domain’s quarterly Rental Report. Dr Nicola Powell, Domain’s Data Scientist discusses the report and its findings.
Kevin: A rental price report out from Domain reflects the fact that Australia’s capital city markets are operating on certainly different property cycles. We will have a look at each of the capital cities, but we’ll focus very much on Queensland and Brisbane. Joining me to talk about this is Domain’s data scientist, Dr. Nicola Powell.
Dr. Powell, thank you very much for your time.
Nicola: Hello. Thanks for having me.
Kevin: That’s a pleasure. We saw a little bit of movement in some of them. The Sydney market’s rental figure surprisingly came back. What do you put that down to?
Nicola: Yes, I know. The unit rental prices actually declined 0.9%. For tenants out there, that means a $5 saving on that median weekly rent. There are a couple of things that I think are probably starting to drive this change. You have to remember that house price rents and unit rents were the same in Sydney. They were both at $550 in the previous quarter, so we have seen it ease a little bit in the unit market.
What we are seeing in Sydney is those building completions are coming to a peak, and you have to think a lot of those would have been sold off the plan to investors throughout that peak time of that investor activity. So, I think we’re probably seeing some of those starting to come on to that rental market, which is helping to increase the supply in certain areas. I think that’s really what’s driven this ease in price. It’s great for tenants out there because it does give them a little bit more choice in the market.
Kevin: Yes, we saw a little bit of growth for investors in Melbourne, and we certainly saw a bit of growth out of Adelaide, as well. That surprised me just a little bit, but it’s good news.
Nicola: Yes. There was a rental growth in houses in Adelaide over the quarter and over the year. Units were stable. What’s happened in the housing market, though, is we’ve had a short-term drop in stock in that market, and I think that’s really put a bit of a short-term pressure on that market.
I’m not sure if that growth will be there. Adelaide is a very steady market. It’s been steady as you go in both the sales and rental market, and I really think that is going to continue.
Kevin: And good growth out of Canberra.
Nicola: Amazing growth out of Canberra. Canberra has a very transient nature in terms of its population. What it’s actually experienced is an increase in the interstate migration, which a couple of years ago was in the negative; they were losing more people to other states and territories due to those public-sector cutbacks. But that has turned around and it’s really regenerated the housing market in Canberra, and we are seeing rents increase.
For Canberra, it’s really going into that peak rental period, which is also putting pressure on the demand. We have all the graduate jobs starting and universities starting, as well. But for investors in Canberra, the yields are pretty good, as well. Units in Canberra are providing investors with the strongest yields compared to all of our major capital cities.
Kevin: Domain data scientist Dr. Nicola Powell is with me.
Great news out of Hobart. That’s an amazing market, and so many people are predicting that it’s going to continue to grow. Investors will be very happy about their returns there.
Nicola: They certainly will. Hobart provided the best growth yields for investors for houses. But in terms of the level of growth that tenants are seeing, we’re experiencing hefty quarter-on-quarter increases for both houses and units.
And Hobart was the only city to record double-digit annual growth in their rents. It’s a tightening market, it’s a very competitive market, and I think moving forwards, tenants really need to prepare themselves that higher rents are probably going to continue into this year.
We’re starting to see a little bit of a response in terms of development approvals; they are starting to increase. But as with any developments, whether it’s a house or a unit development, they take time to impact the market. So, I think it’s going to have little impact this year for Hobart.
Kevin: And the Brisbane housing market rental returns are quite stable, but a bit of a drop in units. What do you put that down to?
Nicola: We know there have been huge amounts of developments in units in Brisbane, and that’s really just reflective of the fact that they’re still impacting the year-on-year growth in rent. It’s really given investors in Brisbane little reason to raise their rents, because they have been impacted by this high level of development in Brisbane.
Kevin: Dr. Powell, thank you very much for your time. Dr. Nicola Powell is the Domain data scientist with that report. Thanks for your time.
Nicola: Thank you.