SLUMPING home prices and persistently poor housing affordability helped lift quarterly rent yields for the first time in nine months, raising hopes for an improved real estate market this year.
National median weekly rent for houses rose by 1.1 per cent in the final quarter of last year, while rents for apartments and units rose 1.4 per cent, according to Fairfax-owned Australian Property Monitors. Both measures had been flat in the previous two quarters.
”Increasing competition for properties, particularly from home buyers unable or unwilling to enter the property market has resulted in rising rental prices over the December quarter for both houses and units,” APM senior economist Andrew Wilson said.
The underlying demand for affordable housing comes after nearly a year of softening home prices. In the 11 months to November capital city home prices have sunk by 3.7 per cent but rose 0.1 per cent in the month. Despite the moderate falls in home prices, Australian housing is considered some of the least affordable by global standards. The median home price stood at $450,000 in November.
The quarterly rise in rents – typically a sign of a robust property market – masks unevenness across the capitals, with house rents in Sydney increasing 4.2 per cent over 2011, while falling in Melbourne by 1.4 per cent. For the year, unit rents rose 4.5 per cent in Sydney and 2.9 per cent in Melbourne.
”It has been a much less competitive rental market in Melbourne than in other capital cities,” Mr Wilson said. A wave of inner-city unit construction, expected in Melbourne over the coming year, will likely cap rents in the city.
Mr Wilson said Sydney rents might soften slightly in early 2012 in the aftermath of a surge of first home buying activity in the fourth quarter of 2011. First home buyers rushed to take advantage of the New South Wales stamp duty concession for first home buyers, which expired at the end of December.
Mr Wilson believes the rate cuts will support both rental growth and home prices.
”The fundamentals of the property market are starting to reassert themselves,” he said, with the shortfall in housing putting a floor under further price falls and keeping activity ticking.
Economists remain divided about how rapidly, if at all, the housing market will rebound on lower rates, given worries about the European debt crisis clouding the borrowing and spending decisions of Australians.
The Westpac-Melbourne Institute index of consumer sentiment, released yesterday, rose only 2.4 per cent in January, even after the two interest rate cuts, suggesting the mood of households remains wary.