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Rental Growth Falls in 2015

rental growth fallsAn article on Your Investment Property says that 2015 was a year marked by falling rental growth. In Australia, the residential rents have spiked by only 0.3% over the course of 2015 and this is the slowest the rental rate has moved in a long time.

Rental rates have been pretty low

For the year 2014, rental growth stood six times higher at 1.8%. Melbourne witnessed the greatest hike in rental rate at 2.2%. Sydney and Canberra had 1.9% growth, while Hobart had a paltry 0.6%. Darwin suffered a decline of 13.3% while Perth recorded an 8% drop in rental rate.

Why we should gear up for further drop in rental rate?

Brisbane recorded a 0.3% deficit and Adelaide’s rental rate got wiped by 0.2%. CoreLogic RP Data analyst Cameron Kusher feels that slow or very moderate rental growth is part of the package we have bought and we should get used to the idea.

With the rate of interstate migration coming down and an abundant supply of new housing stock (clearly including the rental stock), there is only one way ahead, and it’s saying that rental growth may see worse times. Landlords clearly feel the brunt of oversupply as it disallows them to increase rent. Poor rental growth disturbs the yield and in the process gives investors sleepless nights, too.

Tenants are having a field day as rental growth falls

Tenants are now in an enviable position. With so much oversupply, they know the landlords cannot come to them with a “pay more rent” card.

You can read the original article here.

Trend quite expected in the part of the property cycle we are in

Every property cycle moves through easily distinguishable phases. We are well into the consolidation phase and one of its key elements is a dropping rental rate. If examined properly, this is something we have come to expect for some time now. Ferocious construction activity is part of the country-wide picture.

Sydney is perennially under-supplied

Sydney remains the only capital city facing undersupply (and this is because nothing can fill the kind of demand Sydney’s market is facing). Net interstate migration and relatively strong population growth will only further the gap between demand and supply, with a low vacancy rate situation. Rental growth won’t suffer as much as it does all across the country. For now, even Sydney’s rental growth has been moderate and therefore nothing to call home about.