House rental prices rise, unit rental prices fall hard across country

The gap between house and unit rental prices has grown over the December quarter, according to the latest data from Domain’s December Rental Report.

In not-so-unexpected news for property investors across Australia, unit rental costs in most capital cities experienced the steepest annual fall on record, hitting the lowest asking price since early 2014.

Many investors continued to struggle with the impact of Covid-19 on the housing market, such as fewer overseas travellers and greater levels of unemployment pushing down demand.

It is now, for the first time in five years, more expensive to rent a unit in Brisbane than Melbourne. This shift has been pushed by the growing number of East-coast Aussies in hard-hit Covid-19 cities, such as Melbourne and Sydney, heading north for a sea change.

Conversely, house rent prices grew in most capital cities across Australia (excluding Melbourne). Darwin saw a sharp increase of 12.2 per cent over the December quarter, rising from a median weekly asking price of $490 to $550 – now on par with Sydney’s median weekly house price.

“House rents are now at a record high following the steepest annual gain in just over a decade,” advised Domain Senior Research Analyst, Dr Nicola Powell.

“Most capital cities have the highest house asking rent since Domain records began in 2004, apart from Darwin, Perth and Hobart.”

How capital city rent prices have changed

Australia bounced back from a June quarter loss comparable to The Great Depression in the September quarter, and rental prices for houses followed suit by climbing significantly in the December quarter, according to the Domain Rental Report.

Sydney’s median price for houses grew 1.9 per cent to $550 a week, but Canberra recorded the highest median weekly house price at $600.

Melbourne was the only capital city that saw no growth – no doubt influenced by the impact of its Covid-19 outbreak and tough lockdown restrictions.

Median weekly house rental prices

Source: Domain Rental Report, December Quarter 2020.

It was a different story for our nation’s biggest capital cities in terms of median unit prices, as Sydney experienced a 5.1 per cent drop quarter-on-quarter. Melbourne followed suit, with unit rental prices falling 3.0 per cent in the same time frame from $400 to $388 a week.

However, Brisbane, Perth, Canberra and Darwin experienced quarterly growth on median unit rental prices. All in all, the national median unit price fell by 3.4 per cent quarter on quarter.

Median weekly unit rental prices

Source: Domain Rental Report, December Quarter 2020.

Investor home loan rates falling too

There is still good news for investors paying down a mortgage with units in our biggest capital cities. Thanks to the November cash rate cut, the average variable investor home loan interest rate (paying principal and interest) fell from 3.75 per cent in September to 3.67 per cent in December, according to RateCity Research.

Investors struggling with mortgage repayments currently find themselves in the lowest interest rate environment on record. If falling rental prices and the value of your mortgage are creating financial stress, it may be worth considering refinancing to a more competitive loan option to create some financial breathing room.

And investors with properties that saw rental prices rise in the December quarter may be in a better position than recent years to nab a competitive new home loan. With housing prices slowly recovering and therefore increasing the value of your investment, and rising rent prices adding to your overall genuine savings, you may find lenders are more likely to offer you a competitive interest rate on a refinanced investor home loan.

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