Australia’s capital city housing markets reported mixed results over the September quarter. Overall national median weekly asking rents for houses increased by 1.0 percent with unit rents up by 0.7 percent.

Melbourne and Brisbane were the only contributors to national house rental growth over the quarter with increases of 2.8 percent and 1.3 percent respectively.

The increase in Melbourne’s house rents was the first recorded by that city for over a year. Despite the rise in house rents, Melbourne retains significant affordability advantages over all other mainland capitals with the exception of Adelaide.

Sydney maintains the mantle of the most expensive major capital for renting either a house or unit. Affordability barriers however continue to impact on the Sydney rental market with house rents flat at $500 per week over the past year. Unit rents in Sydney however predictably continue to rise and at $480 per week are set to catch house rents sooner rather than later if current trends continue.

Perth recorded falls in both house and unit rents over the September quarter with houses down by 2.0 percent and units falling by 1.2 percent. These falls are unsurprising given the extraordinary and unsustainable increases in Perth rents over the past year. Despite these latest falls Perth houses rents have increased by 6.7 percent over the past year with unit rents up 10.5 percent.

The Brisbane rental market continues to tighten with house rents up by 1.3 percent for an annual increase of 3.9 percent. Brisbane unit rents have recovered some of recent decreases to be up by 2.8 percent over the quarter for a 1.4 percent rise over the year.  

Canberra, Adelaide, Hobart and Darwin continued to record flat or declining rental growth for both houses and units over the September quarter with the exception of Darwin units where rents rose by 7.7 percent but nonetheless recorded no growth over the year.

Rental growth can be expected to remain subdued in most capitals over the remainder of 2013 as low interest rates drive increased activity from first home buyers, investors and home builders reducing demand and increasing supply in most rental markets.

No surprise that rising house prices and flat rents continue to impact downwards on gross rental yields particularly in Sydney where investor activity nonetheless remains at high levels.

Sydney has now joined Melbourne as the only capitals with rental yields for units below 5 percent. Melbourne remains the capital with the lowest yields at 4.37 percent for houses and 4.73 percent for units.

Brisbane continues to provide investors with the highest gross yields for houses of all the major capitals at 5.12 percent. Perth also continues to record the highest gross yields for units of all the major capitals at 5.56 percent however yields are declining as rents fall and prices remain solid.

Dr Andrew Wilson is Senior Economist for Australian Property Monitors