ACT News

Canberra's rental yields on the rise, despite sluggish property market

Canberra has experienced the lowest annual shift in rental prices in Australia over the past decade, despite being the only capital city to surge ahead in rental yields in 2015 in what has been described as a "win-win" for renters and investors.

The difference in the median rental prices for detached houses and units in the past 10 years is just $122, CoreLogic RP Data showed on Monday.

Canberra has the second-smallest percentage of vacant houses and units for rent among Australia's capital cities.
Canberra has the second-smallest percentage of vacant houses and units for rent among Australia's capital cities. Photo: Supplied

And analysis shows that while capital city rents are increasing at their slowest annual pace on record with softened yields, rental returns in Canberra are higher than a year ago.

The annual rate change in rental prices from 2005 until 2015 in Canberra was 2.8 per cent, lower than any other capital in Australia.

The median price of leasing a property in Canberra was $375 in 2005, compared to $497 today.

Rental prices peaked at $531 in December 2012 before steadily declining to $497.

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Canberra's median weekly house rental price was recorded at $507 in 2015, a spike of 1.9 per cent on the previous year.

Rental rates for units in Canberra rose 2.1 per cent in the past 12 months to a median price of $408.

While rental yields for detached houses dipped slightly to 4.2 per cent, return on units increased to 5.2 per cent, up 0.2 per cent from the previous 12 months.

Residential Development Council executive director Nick Proud said the market had been quite vibrant for the past decade.

"Being a renter in the ACT, it is a good environment to get a reasonable property for a reasonable price. We're not seeing huge increases in the cost of renting so that's good news for those that rent but that being said, we still see a strong reasonable yield for those that are the landlords of those properties. It's a bit of a win-win for the market."

But in order to see the affordability that's beginning to creep in stay there for the long term, Mr Proud said the supply of land needed to keep coming through. 

"There's an affordability to investing in the Canberra rental market, there's availability for someone in that middle or lower rungs of the ladder in their career to look at investing in the ACT region, get a reasonable return on their investment and know that it's likely to rent pretty quickly," he said.

But the news isn't as great across the rest of the capitals, the data revealed.

CoreLogic RP Data research analyst Cameron Kusher said the construction boom, slowing population growth, low mortgage rates and heightened investor activity slammed the brakes on rental growth across Australia last year.

"We've never seen rental growth as sluggish as it is at the moment. Furthermore, we're expecting to see more of the same over the coming months due to increases in the supply of new housing, rental stock and a further slowdown in migration," he said.

Mr Proud said Canberra's strong public service demographic made it buck this trend.

"The ACT will usually have a reasonable yield based on the strong public service support of the housing sector," he said.

"That demand from the public service is quite unique compared to other capitals in Australia so you'll always see that vibrant residential rental market and that in turn will bring those that are landlords into the market to invest."

And going forward, that strong yield was expected to continue, Mr Proud said.

"We've seen the federal public service cuts been and gone and played through it would seem now, so we should see a strengthening in the rental market from the demand side.

"We are seeing the ACT's economy going quite well and the national economy as well, there's low jobless rates, wages in the ACT are quite strong compared to other capitals, so we should expect that the rental market will remain quite strong for 2016."