Sydney is set to no longer be the most expensive city in Australia to rent a house as rising property supply forces more landlords to slash their rental rates.
The median asking price for all Sydney rentals, including townhouses, units and houses, dropped 3 per cent over the past year, CoreLogic figures showed.
The drops came as the Harbour City’s glut of untenanted rental properties rose to nearly 22,000 in November – nearly 8000 homes more than at the end of 2017.
The rising supply increased competition between landlords for tenants, encouraging many to drop their rates to stave off a long vacancy period.
The result was that the median weekly rent for houses hit about $550 per week.
This was level with house rents in Canberra, where average rents climbed 5.1 per cent for the year due to an ongoing rental shortage.
The $530 per week median rent for Sydney units remained the most expensive in the country.
CoreLogic analyst Cameron Kusher said Sydney rents would likely continue dropping this year and landlords would have to be competitive with their rental offers if they wanted to snag a tenant. Tenants, meanwhile, had some room to negotiate prices, he said.
Figures from SQM Research showed rents have been falling at a varying pace across Sydney areas. The depth of the falls often correlated with the level of new housing development in the region.
The Hills District was one of the weakest rental markets, with the measure for unit rents dropping 5.1 per cent for the year, according to SQM’s weekly rental index.
Rents also dropped 6.5 per cent annually for three-bedroom houses – a housing category heavily supplied in Hills construction hubs such as Kellyville.
Eastern suburbs house rents dropped 7 per cent, while unit rents dropped 3.3 per cent. The Sutherland Shire had even bigger rental falls, with unit rents falling 10 per cent and house rents 5.5 per cent.
The exception to the rental drops was the northern beaches region, which was one of the few markets where house rents increased (5.5 per cent).
Western Sydney house rents dropped 3.9 per cent, while unit rents dropped 1.9 per cent.
Drops in rent were good news for tenants, but CoreLogic head of research Tim Lawless said they would have minimal impact on new landlords.
Sydney rental returns were actually improving, despite rents going down, Mr Lawless said.
“Although rents were down 3 per cent in Sydney, dwelling values were down by a much larger 8.9 per cent, providing a two basis points lift in yields,” he said.
The improvement meant gross rental yield was 3.1 per cent for houses and 3.8 per cent for units.
These figures remained well-below national trends, but were likely to grow, Mr Lawless said.
“Considering rental conditions remained relatively soft, a recovery in gross rental yields is likely to be a long and gradual process.”