A recent CoreLogic report showed that rental markets were small but remained reasonably stable in 2018 relative to still sluggish housing values ​​and reduced growth rates.
In the combined capitals, weekly rents remained unchanged throughout the year. Rents in Sydney and Darwin, respectively, decreased by 3% and 5.8%, respectively. Hobart and Canberra posted more encouraging results, increasing by 5.8% and 5.3% respectively over the period.
The study also found that returns tend to increase as values ​​fall. Although rental markets remain clear, rental conditions have outperformed the value of housing in most regions. This allowed an increase in rental yields.
The gross rental yield went from 3.4% in 2017 to 3.7% in 2018 in all the capitals combined, while the gross returns of the regional markets combined went from 4.9% to 5%.
Hobart and Darwin are the only capitals whose gross rental yields have fallen over the course of the year. The value of housing in Hobart (+ 8.7%) grew faster than rents (+ 5.8%). As a result, the gross yield decreased further during the year. Similarly, Darwin reported a drop in rental yields due to a drop in rental rates (-5.8%) higher than that of housing (-1.5%).
On the other hand, Melbourne, Sydney and Perth experienced the biggest improvements in terms of performance. Although rents fell by 3% in Sydney, the value of housing fell by much more than 8.9%. This paved the way for an increase in yields of two basis points.
The performance improvement in Melbourne was more substantial due to the 2.4% increase in rents over the year, while the value of housing fell by 7%. This resulted in a four basis point increase in gross rental yields.
In Perth, rents increased steadily, rising 2% over the previous year, while housing values ​​were down 4.7%. The net result was a two basis point increase in rental yields in Perth.
Overall, CoreLogic's report indicates that, while yields are improving, gross rental yields remain well below long-term average levels, particularly in Sydney and Melbourne.
"Given the fact that leasing conditions have remained relatively flexible, the recovery in gross rental yields is likely to be a long and gradual process," said Tim Lawless, head of research at CoreLogic.
Lawless also said that there could be a change in investor behavior, along with possible negative correlator changes.
"With changes in negative leverage policies likely to lead to a change in government, investors could focus on markets with stronger leasing conditions and where there is potential for higher rental returns, which should help protect against any change in tax policy, he said.
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