New data has revealed bad news for Brisbane’s rental market, with no relief in sight for landlords, according to one buyer’s agent.
Fresh figures from the Domain.com.au Rental Report have revealed that rents in Brisbane have remained static over the year to September.
Rents for houses and units in Australia’s third biggest capital city are sitting at $400 per week and $370 per week, unchanged from the same time last year.
From a landlord’s perspective, that compares unfavourably with both Melbourne and Sydney, where rents are rising at a rapid pace.
Sydney’s median rental cost increased by one per cent over the September quarter to a new record high of $530 per week (up 3.9 per cent year on year). Rents for units also increased, from two per cent over the quarter to a new peak of $510 per week (up 3 per cent year on year).
According to Domain, those figures mean that Sydney is now home to the highest capital city rents in Australia.
“Sydney is the stand-out capital this quarter with rental prices continuing to rise, despite an increased supply of properties available. Low levels of first home buyers are offsetting investor activity and the record levels of new buildings is having no effect, with demand remaining higher than supply,” Domain senior economist Andrew Wilson commented.
Melbourne wasn't far behind, with median house rents increasing 2.6 per cent year on year to sit at $390, although there was no movement over the September quarter.
Median unit rents also remained flat during September, at $370 per week. That figure represents a 1.4 per cent upward shift on the same time last year.
The situation in Brisbane isn't likely to improve any time soon either, with record levels of buying activity from investors and owner-occupiers driving massive vacancy levels, according to buyer’s agent Meighan Hetherington.
Ms Hetherington, who is the director of Brisbane-based Property Pursuit, explained that the increase in vacancy rates is severely restricting the ability of landlords to raise rental prices.
“We’re in a rising market for prices – there’s a lot of activity with buyers and there are a lot of investors in the market. So that’s bringing on a large amount of supply, both units and houses, units and townhouses, and houses. At the same time a lot of those tenants who have been part of the tenant pool for some time have decided to become property buyers to become part of the rising market, so we've got an increase in supply of properties clashing with a decrease in the demand because tenants are leaving the tenant pool,” she explained.
The news that Brisbane rents have remained static did not surprise Ms Hetherington, who explained that the rental market has been in decline for more than two years.
“2013 was when we saw a peak in rental yields – that was when we saw the lowest level of supply for investment properties and the highest levels of demand. So that was when we were seeing maybe nine/10 groups going through a rental property when it was available for lease and multiple applications for the property. Since 2013, heading down towards the end of 2013 and into 2014, that’s when we started to see a movement in the prices for property sales – so more investors coming into the market. [It] wasn't dramatic – it has been slow and steady, but the result now is that there are more properties available to rent and less people looking for them [and] that rents have come back a bit,” she said.
Despite the issue not being isolated to individual suburbs or property types, Ms Hetherington said that unit stock has been the worst affected by the tenant downturn, with some properties spending as long as three months between tenants.
“We’ve got such a strong level of investor activity at the moment I think the most affected market is the unit market, there is quite an oversupply and there’s a lot more to come onto the market. We’re actually going through a lot of analysis on that market at the moment and there isn't an increase in tenants looking for that product – it’s not typically a product that owner-occupiers buy. [It’s an] investor product, the units, but there’s a lot of supply and not a lot of tenants and I think we’re going to see quite long periods of vacancy,” she said.
Investors wishing to capitalise on Brisbane’s price growth while maintaining short-term earning potential should target houses or townhouses, according to Ms Hetherington, while those who have invested in units should take measures to ensure their property stands out from the crowd.
“So in that case the only thing investors can do is make sure that property is well maintained and has air conditioning and is renovated or near new. The only [further] thing you can actually do is lower your rent to get a tenant in, and then if you can maintain that tenant you might be able to do some minor rental increases during the period when leases are renewed,” she said.