Building boom helps keep lid on house, apartment rents around capital cities

A building boom across major Australian cities is helping to keep a lid on rent increases despite strong population growth, new figures show.

But tenants in some capitals still face high costs, with Canberra and Sydney renters slugged well over $500 a week for the average house.

“It’s the supply and demand story,” Domain economist Trent Wiltshire said of the Domain Rental Report for the June quarter, released on Wednesday.

“When construction increases that generally keeps a lid on rents. But the other side of the coin is when there’s really strong population growth, you need to build a lot just to keep rent growth at CPI.”

Canberra still has the highest house rents in the country, at a median weekly asking rent of $550, the report shows.

Sydney is close behind with a $530 median weekly rent, although this has edged down over the past year.

And Hobart has overtaken Melbourne to be the country’s third most expensive city for rents.

But Brisbane may be the best city to be a renter right now, with a median house rent of $400, the same price as in 2013, Mr Wiltshire said.

Median weekly asking rents, houses

Source: Domain rental report, June quarter

Sydney

Sydneysiders weary of high housing costs are finding some relief, with the city recording its largest annual fall in rents in 15 years as new housing stock is built.

Apartment rents in the harbour city fell 4.5 per cent over the past year, but at $525 a week they remain the most expensive in the country.

House rents are $20 cheaper than the same time a year ago, but are the second-highest in the nation at $530 a week.

Although the drop in house rents was “pretty minimal”, the declines are “definitely good for renters”, Mr Wiltshire said.

“Prices have increased a decent amount for the past few years,” he said.

“It’s proof that building more houses does work in reducing housing costs, it can just take a while.

“Sydney’s been through its big apartment construction boom and that directly impacts unit rents but it also has an impact on houses because they’re substitutes.”

Canberra

Canberra’s strong population growth is buoying demand for accommodation, with house rents still the highest in the country after overtaking Sydney six months earlier.

Renters looking for a house can expect to pay $550 a week on average, the same as a year ago.

Apartments will set tenants back a median $470, some $20 a week higher than in June 2018.

Mr Wiltshire said the nation’s capital has had a few years of strong population growth, with a large apartment construction boom only playing catch up to the increase in demand.

“There’s lots of demand for particularly well-located apartments in Canberra, that’s the long professionals moving there,” he said.

“It takes while for new supply to catch up.”

Even so, someone paying the typical rent could probably find a property closer to the city centre in Canberra than someone paying average rent in Sydney, he said.

Median weekly asking rents, units

Source: Domain rental report, June quarter

Melbourne

The Victorian capital has had a boom in high-rise construction in the inner city over recent years, as well as strong population growth.

House rents, at $430 a week, have edged down 2.3 per cent over the past quarter for the first time in seven years, but are steady compared to a year ago.

Unit rents are still rising, up $10 a week to $420 over the past year.

“Even with this building boom we’ve had in Melbourne, that’s only just making rents grow in line with inflation because of our incredibly strong population growth,” Mr Wiltshire said.

“We’re not seeing rents skyrocket … given the population growth we need to built a lot to keep this balance.”

Regional areas have also seen rents jump, with housing demand flowing out of the city to Geelong, Ballarat and Bendigo, he said.

Brisbane

Further north, Brisbane has also seen a surge in inner-city apartments in recent years, prompting worries about an oversupply.

But unit rents have managed to edge up $10 a week since June last year, to a median $380.

House rents are steady over the year at $400 a week.

The rise in construction has kept a lid on rents for both types of property, Mr Wiltshire said.

Perth

Perth is the most affordable capital city to rent a house, at just $365 a week, as the city’s property market recovers from the mining slowdown.

But there are green shoots for landlords: as the resources industry starts to pick up again, house rents are up 4.3 per cent over a year.

Apartment rents have risen $10 a week to $310 over the same period.

Mr Wiltshire acknowledged that for tenants struggling in WA, rising rents were not welcome.

“But in terms of the overall WA economy, it’s probably a good sign,” he said.

“It’s probably being influenced by a pick-up in population growth, stronger employment, but it’s also a consequence of very low levels of building in the past couple of years.”

Rents are still 20 per cent below their levels five years ago, he said.

Hobart

Hobart’s rental market has come under “significant pressure”, Mr Wiltshire said, with costs soaring and house rents eclipsing Melbourne.

House rents have jumped 9.8 per cent in the past year to $450, while apartments are up 5.6 per cent to $380.

Over the past five years, rents are 45 per cent higher for both types of stock.

But relief could be in sight, with higher rents encouraging investors to spark construction projects.

“Building approvals are up in Tasmania, so supply is responding to demand,” he said. “But it takes a while.”

Rental homes being turned into short-term lets to meet demand for tourism were probably affecting rents too, he said.

Adelaide

The South Australian capital has some of the most affordable options, boasting the second-cheapest house rents in the country.

Tenants can expect to pay $385 a week for the median house, up $10 from a year ago.

Apartment rents are the cheapest in the country at just $305, up $5 from this time last year.

Darwin

Darwin rents have edged lower amid a broader property slowdown in the city.

House rents are $10 a week cheaper over the past 12 months, at a median $490.

Apartment rents are sitting at a median $385, down from $400 this time last year.