Which regions experienced the greatest increases in rental value during the year?
The CoreLogic Quarterly Rental Review for June showed a sharp 6.6% increase in rental values during the year. This follows a decade of relatively moderate annual rental growth, averaging 1.8% since June 2011. The annual growth rate of 6.6% marked the largest annual increase in more than a decade.
CoreLogic data from 88 SA4₁ markets shows that, as with the current recovery in the housing market, increases in the rental market have been widespread. Annual rent increases were observed in 79 of the 88 SA4 markets analyzed, ranging from a 0.2% increase in rental markets in the North East and North West of Melbourne to a 23.7% increase in rental prices. rental values in South East Tasmania.
Areas that had experienced a decline in rental values during the year were largely concentrated in Greater Sydney and Greater Melbourne, with the exception of a slight decline in rental values in the Northern Territory Outback.
Figure 2 shows the highest and lowest gains in rental values for fiscal year 2020-21, while the full list of SA4 results is provided in Figure 5. Among the top 10 regions for growth annual rents featured five markets in Perth, Darwin and Australia’s regional and lifestyle markets.
Figure 1. Sliding annual growth in rental values and decade average, national dwellings
Southeast Tasmania tops the list with rental value growth of 23.7%. Applying this growth figure to the median rent suggests an increase of $ 83 per week in rent over the year. The region saw a -19.3% decline in total rental listings counted in the June 2021 quarter, compared to June 2020. Net internal migration data suggests that for the year through June 2020 , the South East region has seen a positive migration trend, with 660 people coming from other parts of Australia settling in the region. The historic overseas migration to the region has also been positive and may have contributed to the upward pressure on rental values. While regional migration data is lagged from the previous year, more recent preliminary migration estimates also show positive internal migration across regional Tasmania more broadly.
Greater Perth is made up of six SA4 submarkets, five of which are in the top 10 list for annual growth in rental values. In these five regions, rental markets have tightened considerably over the past year, with an average drop of -29.5% in rental listings counted between the quarters of June 2020 and June 2021. In the case of Mandurah, the volume of rental advertisements had fallen by more than -40%. The detailed ABS employment data suggests that each of these regions has also experienced an increase in mining employment over the past 12 months, which may have increased demand for rental properties on these regions. markets.
It should also be noted for the Perth and Darwin rental markets that sharp increases in rental values may be exacerbated by a longer term decline in investor activity. In 2014, a change in the demand for housing was created by a decline in mining activity and employment in the mining sector. Lists of available rents (Figure 3) and investor financing for home purchases trended fairly steadily until the late 2010s, as investors reacted to declining rental yields. The recent increase in demand for housing may be exacerbated in Perth and Darwin by this context of slowly declining rental supply.
Figure 3. Total monthly number of rental listings – Greater Perth and Darwin
The regions that saw rent cuts during the year still largely reflect regions that had previously been exposed to high levels of overseas migration.
Figure 4 represents the sum of the net migration abroad during the three years preceding June 2019 (a measure before the pandemic), compared to the annual variation in the values of rents on the SA4 markets.
The trend shows a negative correlation between migration abroad and annual rental growth for fiscal year 2020-21, reinforcing the impact of international border closures on reducing rental demand. It is believed that because most foreign migrants and visitors to Australia are tenants initially, concentrating in the built-up areas of Sydney and Melbourne, stopping migration abroad had the most immediate impact and disproportionate in rental markets.
Other trends evident in the performance of the regional rental market are those which are also reflected in the growth of purchase prices and internal migration. Australian regional rental markets generally outperformed those of the capital cities, increasing 11.3% year-on-year versus a 5.0% increase in rents in the capital cities. But some of the strongest growth in rents and real estate values have occurred in lifestyle markets, here remote working may have allowed more ‘tree change’ and ‘change at sea’ movement among Australians in the capitals. There may also have been an increase in vacation home purchases throughout the pandemic, which would restrict the stock available for longer-term rental housing.
Figure 4. Annual growth in rental values in relation to the external migration balance – SA4 markets
Looking ahead, current rental demand trends are very likely to be influenced by how COVID-19 continues to impact border movements. It should be noted that COVID has created a need for more resident mining staff in Washington State and NT, as well as to cut off a source of demand for rental markets in Sydney and Melbourne. These sudden demographic shifts have created a dramatic shift in rental demand, while the supply of rental housing is relatively inelastic in its response. Gradually, more investment housing could slow rental growth in Perth and Darwin, while some investors in Sydney and Melbourne could pull out of these markets until international borders reopen to migration levels of before the pandemic.
Check out the full table of the highest and lowest variations in rental values in the SA4 housing markets in Australia below.