Domain’s Chief of Research Dr Nicola Powell says Darwin has bucked the national trend with house rents at a record high while unit rents are dropping

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Episode Transcript

Speaker 1 (00:00):
As we know, Australia's rental market, well, it remains locked
in favor of landlords with limited supply pushing rents to
it all time highs. That's according to Domain's rent report
for the June quarter. But in Darwin, house and unit
rents bucked the rising national trend, with house rents holding
steady and unit rents.

Speaker 2 (00:19):
Declining over the June quarter.

Speaker 1 (00:21):
Now joining me on the line to tell us a
little bit more is Domains doctor Nikola Pal.

Speaker 2 (00:26):
Good morning to you, Nikola.

Speaker 3 (00:28):
That's very good morning to you. Thanks for having me on.

Speaker 2 (00:30):
Yeah, lovely to have you on the show.

Speaker 1 (00:32):
Now tell us, as the chief of research of course
with Domain, what have you found with this the latest report.

Speaker 3 (00:41):
So we have found that there is a diversity of
different rental markets across Australia and I think you know
there is a bit of good news for tenants because
we've had such a tight rental market for such a
long period of time. Darwin is actually bucking the overall
national trend. Now nationally rent continue to rise, but in
Darwin we've seen house rents hold steady over the most

(01:02):
recent quarter, but I would say they are still at
a record high for house rents and Darwin are currently
sitting at six hundred and fifty dollars a week, but
unit rents are declining. We saw them decline over the quarter.
They're at five hundred and fifteen dollars a week.

Speaker 1 (01:19):
Nikola tell us how do those prices compared to other
states and other locations.

Speaker 3 (01:26):
So Darwin is up there in terms of price points.
So in terms of houses, Darwin is the third most
expensive capital city to rent a house. Sydney is the
most expensive city, that's seven hundred dollars a week, and
then it's Canberra and Darwin. In terms of units it
comes in at the fourth most expensive. So for units
it is a bit more middle of the road when
you do that comparison across all the other different cities,

(01:49):
and again you can probably pick which city is the
most expensive or a unit is Sydney.

Speaker 1 (01:55):
Yeah, Sydney seems to be astronomically high. I mean, in
the seven hundreds. Jeez, that's a lot of money, isn't
it for you? Weekly sort of expenses.

Speaker 3 (02:03):
Sydney is just far superior in terms of price point
compared to other capital cities. And it's interesting this quarter
it's the first time since twenty eighteen that Sydney is
the most expensive city to rent a house and a
unit to It actually overtook rental prices in Canberra over
the most recent quarter for house house rents, and Camera's

(02:25):
up there too in terms of what renters are paying
higher average wage, though in Camera Darwin also has that
we do have to consider that when a city has
a higher than average wage compared to the other cities,
that also can feed into higher rental prices.

Speaker 2 (02:42):
Also, Yeah, that was going to be my next question.

Speaker 1 (02:44):
Why is it that a place like Darwin, you know,
from the research that you've done, why is it that
our rent seem so high? Because I guess when you
look at our population, you know, we're probably more comparative
to a place like Townsville or cans or some more
regional parts of Australia. But when it comes to our
rents and our living expenses, they're right up there with
the other capitals.

Speaker 3 (03:05):
They certainly are. And I do think that the element
of a higher average wage does feed into higher rental prices.
And there is an element that Darwin does have a
bit of a transient nature to its population, and I think,
you know, if people are moving and relocating. You know,
they're willing to maybe pay that a little bit more
for a more premium home, and you know, six fifty
a week for a house is a significant amount of money.

(03:28):
But I think mainly here it's a lack of rental
supply and that's really been the case across Australia. So
the vacancy rate currently in Darwin is zero point six percent.
Now that is very low, and a balanced rental market
has a vacancy rate between two and three percent. So
Darwin is sitting at zero point six I think, you know,

(03:49):
the silver lining or the good news that we have
found is that that vacancy rate is starting to nudge higher,
and I think that's why we started to see a
little bit more of a stability coming out of particularly
house rent calls rather than unit rentals. Unit rentals have
struggled a little bit in Darwin. There not at a
record high. Even though we did see a bit of
an increase. They still remain lower than the record high

(04:11):
for unit rent that was achieved back in twenty fourteen
for Darwin units.

Speaker 2 (04:16):
Now tell me do you expect obvious?

Speaker 1 (04:18):
So we saw the interest rates remain steady this week,
But do you expect that we could see some changes
when it comes to rents, and it could get worse
if we see further interest rate hikes.

Speaker 3 (04:31):
So I think we're starting to see rental conditions turn
a corner. I actually think we're starting to see them improve,
and I mean in favor of tenants. That the tide
is shifting because we have seen overall supply start to
lift and that's coming out in our vacancy rates which
is now edging higher across all of our capital cities

(04:51):
and even into regional Australia as well. And when you
have a look at the latest the latest home loan
data from Australian bureau Stistic loans to investors are now
starting to increase too. So if we continue to see that,
that should translate into additional rental stocks. So I think,
you know, I call it the pressure cooker. It has
been a pressure cooker of a rental market over last year.

(05:14):
In the very early part of this year, I think
we're seeing a little bit of steam being released.

Speaker 2 (05:18):
And it's interesting too.

Speaker 1 (05:19):
I guess you know, you spoke about the lack of
rental supply, but we spoke to the to the Shadow
Treasurer Angus Taylor yesterday who talked about the fact that
you know, in terms of new builds and in terms
of really increasing that housing supply, people are a bit gunshy.
I suppose at this point with those interest rates.

Speaker 3 (05:38):
It's absolutely challenging. The construction industry has really experienced some
unprecedented headwinds and it's created this industry wide slowdown, which
means we've seen a drop in the number of new
homes being built. And this all feeds into it is challenging.
It's hard to make projects feasible for the construction industry,
so you know it is and that's going to remain

(05:59):
challenging because I think you know, while we saw interest
rate pause, we're still expecting the cash rate to have one,
maybe two more rate hikes before that period of stability,
and you know, the market is actually pricing in interest
rate cuts towards the middle part now of next calendar year.
So I mean the outlook is still it's going to

(06:21):
take a large shift in terms of increasing in rental supply.
So across Australia we're actually predicting or are we've estimated
that today we need to double the amount of rental
stock that is currently available to make Australia overall a
balanced rental market. Now that is not something that, yeah,
is a quick fix, so you know, these are you know,

(06:45):
need to be kind of longer term solutions. But what
I would say is we have started to see a
glimmer of a change in terms of increase investment and
activity in a slight increase in the overall availability of
rentals across Australia, but also in well.

Speaker 1 (07:01):
Chief of Research with Domain doctor Nikola Powell. I really
appreciate your time this morning. Thanks so much for having
a chat with us. Thank you, thank you,