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National Media Release

RP Data Weekly Property Pulse


Released: Thursday 23 May 2013

Capital city rental markets remain tight


Despite limited value growth in property across Australia over recent years, RP Data today released good news for property investors, where recent analysis of the capital cities rental market is showing that rental rates are now trending higher, coupled with gains in gross rental yields.
Across Australias capital cities over the past 12 months to April 2013, rental rates have increased by 3.5 per cent for houses and 3.3 per cent for units. While according to Mr Kusher this is a relatively measured rate of growth, it remains higher than inflation. Across the combined capital cities, median weekly rents are recorded at $474/week for houses and $440/week for units. Although rental growth is moderate and yields are virtually unchanged over the year, Mr Kusher said the fact that returns on investment properties are significantly higher than the return on cash is one of the key reasons why investors are again looking towards the housing market for investment return. Over the past 12 months rental growth across the combined capital cities has remained quite moderate and has outpaced home value growth, Mr Kusher said. Perth and Darwin continue to be the standout performers for rental growth performance where rates have surged ahead over the year. Simultaneously, the not-so-good performers have been Canberra and Hobart where in these markets, rental growth has dropped. As at April 2013, house rents were most expensive in Darwin ($614/week) followed by: Sydney ($572/week), Canberra ($539/week) and Perth ($508/week). For units, rents are currently highest in Sydney at $498/week followed by: Darwin ($486/week), Canberra ($448/week) and Perth ($446/week). A retrospective look at rental rates reveals that over the 15 years to April 2013, capital city rental rates increased at an average annual rate of 4.2 per cent for houses and 3.7 per cent for units. According to Mr Kusher, these figures suggest that rental growth over the past year has been below the longer-term average. Perth, Canberra, Sydney and Brisbane are the cities which have each recorded the strongest growth in annual rents over the past 15 years, while across the remaining capital cities; the annual rate of rental growth has been significantly lower. The other important feature of an investment property is the rental yield. Of course the rental yield after costs or net yield is the most important in consideration for an individual property while the figures quoted here at a capital city level are the gross yield (note that gross yields are synonymous with property market reporting due to the fact that that the expense profile for individual investors can vary greatly depending on level of their deposit, the mortgage interest rate, the amount of maintenance required on the property, tax concessions, etc). Gross rental yields across the combined capital cities are currently recorded at 4.2% for houses and 4.9% for units. Todays data revealed that yields experienced a significant compression between 1997 and 2004. Since that time, there has been little overall change in gross rental yields. However, over the past few years we have some slight increases in yields for houses and units. This has occurred due to ongoing increases in rental rates at a time when home values had been declining across all capital cities, Mr Kusher said. Across the individual capital cities, gross rental yields for houses are currently highest in Darwin for both houses (6.0%) and units (6.1%). On the other hand, Melbourne is recording the lowest gross rental yields across the capital cities for both houses (3.6%) and houses (4.4%). According to Mr Kusher, rental growth over the past year has been below longer term averages and its important to keep in mind that home value growth has also been extremely limited on an historical basis. The data also shows that gross rental yields are trending higher at a sluggish pace. Given the current economic environment and cost of housing, it seems unlikely that gross rental yields will return to their previous levels however, rental growth has historically been fairly moderate and if it reverts to this level throughout this period of low value growth we may see further improvement in gross rental yields over the next year, Mr Kusher said. Note: The rpdata-Rismark methodology for calculating yields and subsequently rents is based on an imputation methodology whereby we look at advertised rents over the past six months relative to each property within the capital city. We then fit a rental model for each individual property based on the advertised rents and its specific attributes.
DISCLAIMER In compiling this publication, rpdata.com has relied upon information supplied by a number of external sources and RP Data does not warrant its accuracy or completeness. To the full extent allowed by law RP Data excludes all liability for any loss or damage suffered by any person or body corporate arising from or in connection with the supply or use of any part of the information in this publication. RP Data recommends that individuals undertake their own research and seek independent financial advice before making any decisions. 2012 RP Data Ltd.

Combined capital city rents and annual change April 1997 to April 2013
9.0% 8.0%

Median weekly rent

Annual growth

$500 $450

7.0%
6.0% 5.0% 4.0%

$400
$350 $300 $250

$200
$150 $100 $50 $0 Apr-13

3.0%
2.0% 1.0% 0.0% Apr-97

Apr-99

Apr-01

Apr-03

Apr-05

Apr-07

Apr-09

Apr-11

Source: rpdata, rpdata-Rismark Home Value Index

Capital city rental rates and performance over time To April 2013
Property type Houses Sydney Units Houses Melbourne Units Houses Brisbane Units Houses Adelaide Units Houses Perth Units Houses Hobart Units Houses Darwin Units Houses Canberra Units Houses Combined capitals Units 2003 $375 $330 $312 $279 $257 $251 $254 $218 $272 $243 $234 $197 $331 $267 $339 $284 $308 $288 Median rent 2008 2011 $437 $556 $384 $483 $358 $425 $320 $382 $343 $409 $335 $399 $304 $358 $261 $307 $361 $460 $323 $412 $292 $336 $246 $288 $421 $550 $340 $440 $436 $545 $365 $446 $371 $458 $345 $426 2013 $572 $498 $433 $390 $421 $410 $363 $310 $508 $446 $332 $278 $614 $486 $539 $448 $474 $440 12 mth 2.8% 3.0% 2.0% 2.2% 3.1% 2.8% 1.5% 1.1% 10.5% 8.3% -1.3% -3.5% 11.7% 10.4% -1.0% 0.4% 3.5% 3.3% Growth rates (pa) 5 yrs 10 yrs 5.5% 4.3% 5.3% 4.2% 3.9% 3.4% 4.1% 3.4% 4.2% 5.1% 4.1% 5.0% 3.6% 3.7% 3.5% 3.6% 7.1% 6.5% 6.6% 6.2% 2.6% 3.6% 2.4% 3.5% 7.8% 6.4% 7.4% 6.2% 4.3% 4.7% 4.2% 4.7% 5.1% 4.4% 5.0% 4.3% 15 yrs 4.4% 4.0% 3.5% 2.9% 4.0% 3.9% 3.5% 3.8% 5.1% 4.4% 2.7% na na na 4.0% 4.5% 4.2% 3.7%

Source: rpdata, rpdata-Rismark Home Value Index

Combined capital city rental yields over time Houses vs. units
7.5%

Houses
7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% Apr-97

Units

Apr-99

Apr-01

Apr-03

Apr-05

Apr-07

Apr-09

Apr-11

Apr-13

Source: rpdata, rpdata-Rismark Home Value Index

Capital city rental yields over time To April 2013


Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra Combined capitals 1998 6.0% 7.9% 8.2% 8.4% 8.0% 10.9% na 8.9% 7.2% 2003 3.6% 4.6% 5.0% 5.3% 5.6% 6.7% 8.7% 4.8% 4.3% Houses 2008 2012 3.8% 4.3% 3.5% 3.6% 3.6% 4.7% 3.8% 4.3% 3.2% 4.3% 4.4% 5.3% 5.1% 5.7% 4.2% 4.8% 3.6% 4.1% 2013 4.3% 3.6% 4.7% 4.3% 4.6% 5.3% 6.0% 4.6% 4.2% 1998 6.1% 9.1% 7.4% 7.8% 8.3% 11.9% na 8.8% 7.0% 2003 4.3% 5.0% 6.1% 5.5% 5.7% 6.4% 7.9% 5.2% 4.7% Units 2008 2012 4.6% 5.0% 4.4% 4.4% 4.6% 5.6% 4.0% 4.7% 3.7% 4.7% 4.5% 5.2% 5.1% 5.7% 4.9% 5.6% 4.4% 4.9% 2013 5.0% 4.4% 5.5% 4.7% 5.0% 4.9% 6.1% 5.7% 4.9%

Source: rpdata, rpdata-Rismark Home Value Index

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