Sydney is on the brink of no longer being 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.
This left the average cost of rent for houses at roughly $550 per week, while the average unit rent was nearly $530 per week.
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Harbour City unit rents remained by the far the most expensive in the country but rents for houses were now level with those in Canberra.
Rents for all properties in the nation’s capital grew by 5.1 per cent over the year, CoreLogic reported.
With Canberra facing a rental shortage and climbing housing demand, house rents looked likely to soon surpass those in Sydney.
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.
SQM’s weekly rental index showed the Hills District was one of the weakest rental markets, with the measure for unit rents dropping 5.1 per cent for the year.
Rents dropped 6.5 per cent for three-bedroom houses — a housing category heavily supplied in construction hubs such as the Hills suburb of Kellyville.
The measure for eastern suburbs house rents dropped 7 per cent, while units 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 western unit rents dropped 1.9 per cent.
Drops in rent spelt obvious 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,” he said.
With yields still low, this year’s federal election could prove a pivotal point for the market, Mr Lawless added.
“With amendments to negative gearing policies likely should we see a change of government, investors may shift focus towards markets offering stronger rental conditions and where there is potential for higher rental yields,” he said. “(This) should help to insulate against any changes to taxation policy.”