City with tightest rental market in Australia offers serious investor returns

It’s been all eyes on Adelaide in 2023, where dwelling values remained at record highs but what is happening in the rental market?

Affordability overall across the country has put downward pressure on the speed of rental growth recently, but since Covid, rental values have swollen by 30.4 per cent.

While the cheapest capital for rent in years gone by, Adelaide has lost its position to Hobart – welcome news for investors.

Adelaide’s median dwelling rent sits around $548/week – growth of 7.2 per cent over the past 12 months.

As many lose hope for the dream of homeownership, the rental market is the essential last resort of many across the country.

But the ongoing shortfall in rental listings continues to push rents higher, with the national vacancy rate continuing to record lows.

Vacancy rates in Adelaide remain extremely low and appealing to investors, many of whom are descending on the city from interstate.

In fact, Adelaide has the lowest vacancy rates in the nation - at a mere 0.3 per cent.

In welcome news for investors, rental yields have also increased in Adelaide, now sitting around 3.93 per cent according to CoreLogic.

Rental price growth in Adelaide has continued to escalate, with a 6.7 per cent lift in rental prices over 12 months for houses and a 9.8 per cent increase for units.

Interestingly, over 10 years, rental rates for housing in Adelaide has grown by 49.9 per cent and 46.2 per cent for units, the second-highest growth performance behind Hobart.

Rents rising everywhere

This rental growth in Adelaide is reflected in pricing growth across the board.

In 2017-2018, an entry level home in the more affordable family areas like Woodcroft, Hackham, Morphett Vale or Modbury would set buyers back in the low $300,000s.

Fast forward to the end of 2023, the median price for units in Morphett Vale is $408,041 and $420,977 in Modbury. Both suburbs offer an attractive rental yield for unit investors, of 5.36 per cent and 5.09 per cent respectively.

For a house in Adelaide, Elizabeth South offers the cheapest median rent at $393/week, in comparison to the Church City’s highest median weekly rent of $825 in St Georges.

When compared to expensive Sydney, this offers some respite for renters who would otherwise find the cheapest median rent for a house significantly higher at $487/week in Tregear, in Sydney’s west.

The most expensive suburbs to rent in Sydney are Vaucluse ($2,588/week), Bellevue Hill ($2,240/week) and Rose Bay ($2,174/week).

Rentvesting could be an option for those who call Adelaide home, as buying an investment in affordable suburb while renting and living in a more desirable area can be a stepping stone towards property ownership and financial security.

This is the perfect strategy for first home buyers and families looking to get into the market without the budget, or income, to buy their dream home.

Renting in attractive Adelaide suburb Burnside is doable for a family with a median weekly house rent of $767 but buying here is not, with a median house price of $1,410,636.

When looking to rentvest, capital growth should be the focus – a box Adelaide has ticked for quite some time.