Andrew Wilson: Tenants tough it out in Canberra as rents rise

The Canberra rental market remains a challenge for tenants, with rents rising and vacancy rates still tight.

Latest Domain data reveals more bad news for Canberra tenants with rents for both houses and units continuing to rise. Although house vacancy rates remain very tight, signs are emerging that unit vacancy rates may be easing with increased new apartment supply.

Canberra median weekly asking house and unit rents increased again over the June quarter, up to $475 and $400 respectively. House rents have increased strongly by 5.6 per cent over the past year, with unit rents up by 3.2 per cent. Canberra vacancy rates remain very low for both units and houses, indicating the clear potential for further rent increases over the near-term, although unit vacancy rates have eased recently.

Canberra recorded a vacancy rate of just 1.0 per cent for houses over June which, although marginally higher than the 0.9 per cent recorded over May, remained well below the 1.5 per cent result of June 2015 the year before.  Canberra vacancy rates are the lowest of all the capitals with the exception of Hobart at 0.6 per cent.

Vacancy rates for units eased to 2.0 per cent over June up from the 1.4 per cent recorded over May but, again, well below the 2.9 per cent recorded over June last year. Similar to houses, vacancy rates for units in Canberra remain the lowest of all the capitals except for Hobart.

Latest gross rental yields for residential investment properties in Canberra provide some positive news for investors. Yields for houses over the June quarter at 4.49 per cent remain well above Melbourne at 3.70 per cent and Sydney 3.45 per cent.

Rental yields for units in Canberra at 5.58 per cent are only exceeded by the Hobart market at 5.61 per cent as providing the best returns for investors of all the capitals.

Although Canberra rents continue to rise in what remains a tight rental market for tenants, most other capital cities reported flat or falling rental outcomes over the June quarter. High levels of new apartment construction are rebalancing supply with demand with downward pressure on rental growth in most markets.