Canberra is the most expensive city to rent a house with the latest Domain Group data revealing rents have surpassed Sydney to become the highest in the nation for the first time in 11 years.
The Domain Rental Report for the December quarter shows the median weekly asking rent for houses in the capital has jumped to an average of $560 per week – an annual increase of 3.7 per cent.
In the same period, Sydney’s house rents declined 1.8 per cent to $540.
Domain senior research analyst Nicola Powell said there were a number of factors which had contributed to Canberra’s “rental boiling point” including the Mr Fluffy asbestos removal scheme, which has seen residents in rental accommodation while they build their new homes.
“New residents continue to be lured from interstate and overseas by greater job prospects and the city’s growing and reputable university sector, while transient contract workers are attracted by the major infrastructure projects underway,” Dr Powell said.
“The high-income earning workforce has also helped to drive rents higher, making it increasingly unaffordable for lower income households.
“With investors slugged with higher rates and land taxes, it is also likely landlords are passing on the additional costs to tenants, or opting for high yielding short-term leases in order to recover costs.”
While Canberra rents have jumped ahead of Sydney in the housing market, the city remains behind in the unit market.
The median weekly asking rent for units in the nation’s capital is $465, compared with $530 in Sydney. However, that reflects a unit rental increase of 8.1 per cent in Canberra for the past 12 months while it decreased by 2.8 per cent in Sydney.
While rents rose, rental yields likewise continued to strengthen in Canberra, increasing 0.6 per cent over the year for houses and 6.9 per cent for units.
“Rental yields may appear to be the highest in the nation, however, landlords are faced with higher holding costs compared to other jurisdictions,” Dr Powell said.
|Median weekly house rents|
|Capital city||Median rents||QoQ||YoY|
|Median weekly unit rents|
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|Source: Domain Rental Report, December Quarter 2018.|
The number of investors in the Canberra market is diminishing, according to Independent Property Group managing director of property management Hannah Gill.
“We don’t have a lot of range at the moment and we aren’t seeing investors purchasing in new developments – this has decreased,” she said.
“There are more first-home buyers and live-in owners than investors at the moment, which is putting pressure on rental stock availability. Stock isn’t being replaced as fast as it’s required.”
Tenants’ Union ACT executive director Deb Pippen said there was not enough affordable housing in the capital.
“There’s a lack of supply of affordable housing in Canberra [and] more people are looking for rentals at that end of the market,” she said.
“Vacancy rates in Canberra have been low for many, many years and it means there aren’t enough vacant properties for it to be a healthy market.”
Among the changes are shifting the onus to landlords to justify rental increases above the CPI-based threshold. Ms Gill, who is a board director at the Real Estate Institute of the ACT, said this could result in a rent increase coupled with increasing land taxes.
“Land tax is part of the issue of rising rents. It is the perfect storm – on one hand, we are seeing rising costs for investors. Combine this with the proposed changes to the Residential Tenancies Act, it will be even harder for investors to recover costs,” she said.
“My expectation is when tenants vacate, landlords will bump up the rents significantly on the vacated property to cover lost costs.”
The Tenants’ Union ACT disagreed with the comments.
“Rents are driven by the market, not what landlords want out of the market and, unfortunately for tenants at the moment, with fewer properties it drives the rents up,” said Ms Pippen.
“There is nothing unfair about the changes that have been tabled in the legislation, it’s about making it fairer for people to treat where they live as a home.”