Canberra still the most expensive rental market despite small decline in median rents: CoreLogic report

The median weekly rent in the capital declined 0.4 per cent over the three months to September due to a 0.9 per cent fall in house rents, CoreLogic's Quarterly Rental Review showed.

Despite the minor decline, Canberra was still the most expensive capital city for renters at a median of $682 per week across all dwelling types.

Canberra remained the most expensive capital city to rent a house in - at $730 per week. However, Sydney has overtaken as the most expensive unit rental market at $594 per week, compared to Canberra's $582 weekly median rent.

The vacancy rate across Canberra rentals was 1.3 per cent, a small increase compared to 1.2 per cent for the same time last year.

While the rest of the capitals saw increases in rents, the monthly and quarterly rate of growth is beginning to slow.

CoreLogic research analyst and author of the report Kaytlin Ezzy said the easing in rental growth was surprising, given vacancy rates remained low across Australia.

"The slowdown in the rate of rental growth may suggest an increasing number of prospective tenants are starting to come up against affordability constraints," she said.

Ms Ezzy said it was likely renters would look to form larger households and seek out affordable rental options, as increasing rents added further stress to their budgets.

Despite the quarterly easing, the annual growth rate of national rents remained at a record high of 10 per cent.

"We saw rents fall marginally over the first few months of COVID but, since August 2020, national dwelling rents have surged almost 20 per cent, equivalent to a weekly rent rise of approximately $90 per week," Ms Ezzy said.

"Initially driven by a reduction in the average household size, the continued upswing in values is likely now predominantly being driven by the strong return of overseas migration, coupled with extremely tight rental supply."

In positive news for investors, gross rental yields have expanded nationally as rental values rise while property values depreciate.

For the September quarter, national dwelling values fell 4.1 per cent while national dwelling rents rose 2.3 per cent. As a result, national dwelling yields rose 24 basis points over the September quarter to 3.57 per cent.

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Canberra had the third strongest rental yield across the capitals at 3.97 per cent, behind Darwin (6.26 per cent) and Perth (4.51 per cent).

Continued rental growth and falling home values could see national dwelling yields return to around average levels, the report stated.

"With interest rates expected to continue rising throughout the first half of 2023, adding further downwards pressure on values, it is likely rental yields will continue to trend upwards in the coming months," the report stated.

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