2022 is off to a great start for our investors as Australian rental prices have hit an all time high.
Over the last quarter of 2021, national rental rates saw an increase of 3.4%, achieving an annual price growth of 7.4% – the biggest yearly increase since 2009 according to Domain’s latest quarterly rent report.
Currently, the average rental house in Australia costs $499, seeing an increase of $37 from December 2020. Brisbane and Canberra were the two major cities driving the spike with an increase of 12.9% and 12.5% respectively.
In contrast, due to the extensive lockdowns Melbourne saw a minimal increase of 1.1%, positioning the city as the cheapest location to rent a house.
According to Domain’s Chief of Economics and Research, Dr Nicola Powell, the demand for larger spaces has resulted in landlords asking house rent prices three times faster than units over the past year.
Judging by consumer trends, the desire for more living space was largely driven by the effects of the pandemic – particularly the trend of working from home. In some states and cities, units with a greater number of bedrooms saw significant rent price growth. Combined unit prices across almost all capital cities increased by 2.5%, showcasing the first yearly increase since Q3 2018.
“Rising unit rents have kept gross yields higher across capital cities compared to house yields, providing better investment opportunities for potential investors seeking greater cash-flow,” says Dr Powell.
“Rental supply remains short in many areas providing little choice and strong grounds for further rental price hikes. Investors are returning to the rental property market to take advantage of these trends – this should help to slow down rent growth.”
However, while there may be a slow down in some states, competition to secure a rental property across Melbourne and Sydney is expected to increase significantly upon the return of 200,000 migrants by July, which has historically welcomed more migrants and international students than any other state.
Rising rental yields enable investors to increase their returns, decrease their personal debt and create increased borrowing capacity for further property investment purchases.
Be sure to keep an eye out for more information on the Australian rental property market, or contact us to book in a free consultation here.