Across the combined capital cities, rental rates increased by 0.1 per cent in April and continue to rise at their slowest annual pace in more than a decade, according to CoreLogic RP Data's latest review.
Currently, combined capital cities rental rates are recorded at $487 per week and rose by just 0.1 per cent over the month, 0.7 percent over the quarter and 1.7 per cent over the past year.
For four consecutive months, the country's current annual rental growth rate has sat at 1.7 per cent; a level not experienced since June 2003. Yields also continue to diminish as growth in dwelling values outpaces rents.
Research analyst Cameron Kusher said, "Although rental rates are still increasing, they are doing so at a moderate rate. The slow pace of rental application can likely be attributed to the booming level of dwelling construction coupled with high levels of buying activity from the investment segment which is adding additional rental stock to the market and curtailing rental increases."[urbanRelatedPost][/urbanRelatedPost]Across the capital cities, Sydney and Hobart recorded the greatest increases in weekly rents over the past year.
Rents have fallen over the past three months in Perth and Darwin; along with Canberra these cities have recorded falls over the year (down -4.2%, -4.7% and -2.6% respectively).
Looking at the performance of houses, Mr Kusher noted that there isn't a great deal of difference in the rates of rental appreciation.
House rents were recorded at $492 per week across the combined capital cities in April 2015 compared to $461 per week for units. House rents have recorded stronger growth over the month (0.1%) compared to units rents which fell by -0.1%.
Today's rental review confirmed over the quarter, unit rental growth (0.6%) has been lower than houses (0.7%) however, over the past year units have recorded slightly stronger rental growth (1.9%) than houses (1.6%).
According to Mr Kusher, if we compare the current rate of rental growth with the 10-year average annual rate of rental appreciation, the data highlights that rental growth is currently sluggish across all cities.
"In fact, the 10-year average annual rate of rental growth is higher than the current growth rate in each capital city. The slower pace of rental growth may be attributed to a number of factors including: a ramp-up in investment purchases resulting in an increase in rental stock, an increase in housing supply which has also added to the rental stock and a reduction in net overseas migration decreasing demand for rental stock," he said.
With residential construction activity continuing to increase, particularly for inner city units, Mr Kusher expects that the additional housing supply may result in an even lower rate of rental growth.
"This is likely to be the most evident in the markets where new unit supply is surging, being Melbourne and Brisbane and to a lesser extent Sydney," he said.