Canberra residential tenants face continuing rent increases

It’s bad news for Canberra tenants, with rents for both houses and units on the rise and with continuing low vacancy rates indicating the likelihood of further increases over the near term.

Canberra median weekly asking house and unit rents increased over the March quarter to $470 and $395 respectively. House rents have increased by 4.4 per cent over the past year, with unit rents up by 1.3 per cent.

Canberra March vacancy rates remain very low at 1.5 per cent for units and just 0.9 per cent for houses – both unchanged from the February results. Canberra’s rental markets have tightened over the past year, with the house vacancy rates falling from 1.2 per cent and the unit vacancy rate down sharply from 3.1 per cent.

Canberra’s overall home vacancy rate, at 1.1 per cent, is the second lowest of all the capitals, just ahead of Hobart at 0.9 per cent.

Home rents in most capital cities continue to rise and, with falling vacancy rates, indicate an ongoing and deepening shortage of rental properties.

Unit rents also increased in Sydney, Melbourne, Brisbane and Hobart over the March quarter, with Adelaide remaining at record levels, consolidating recent sharp increases.

Apartment rents are on the rise generally, despite the recent unit building boom notionally providing more available rental stock to capital city markets.

Chronic shortages of house rentals and high rents are likely pushing tenants into the apartment market that typically provides more affordable and available home choices.

The sharp decline in investor activity since mid-2015, as a consequence of tighter bank lending conditions from changed financial regulations, has clearly exacerbated rental shortages. Continuing high levels of migration and low numbers of first-home buyers are also keeping rental demand ahead of supply.

The clear exceptions to tight capital-city rental markets are Perth and Darwin, where rents continue to fall. This reflects the impact of the recent downturn in the resource economy and the end of the significant rental demand driver of the fly-in, fly-out workforce.

Dr Andrew Wilson is Domain Group chief economist. Twitter: @DocAndrewWilson – My Property, 2UE, Fridays 2-3pm, Saturdays 12.30-1pm.