RENTAL PRICES across Newcastle have stagnated over the last three years, with growth at just a third of the rate recorded in the rest of New South Wales.
Housing NSW figures obtained by the Newcastle Herald show that since the beginning of 2015, the median rental price for a detached home in the local government area has climbed five per cent, from $400 to $420 per week.
During the same period, median rents across the rest of NSW rose by 15 per cent, from $400 to $460.
It's a reversal of fortunes for tenants, after a rental accommodation 'crisis' gripped Newcastle a decade ago.
As the vacancy rate plunged to just 1.4 per cent, the cost of renting soared by more than 10 per cent in a year and there were even reports of 'bidding wars' between prospective tenants.
But an injection of supply and increasing interest from investors appears to have turned the tables, with the vacancy rate hitting a high of 4.6 per cent in April, 2015.
This year it has stabilised, hovering at between two and three per cent. The most recent figures from the Real Estate Institute of NSW show it sat at 2.9 per cent in September.
It comes as the median house price in Newcastle has skyrocketed about 40 per cent over the past four years.
A spokesperson for Leah Jay property management specialists said there was often a misconception that because house prices were booming, there would be steep increases in rents too.
"Rents are dictated by supply and demand, even in a seemingly hot property market," she said.
"Over recent years we have seen more investors coming to the region and significant property development, this provides additional properties to the rental market."
The sluggish price growth has been a salve for university students, long-term renters and first home buyers scrimping for a deposit.
But some landlords have admitted it is dampening returns and proving increasingly difficult to find tenants.
"It was pretty easy to let out when I first bought it," landlord Ryan Meredith said of his investment property at Merewether, which he purchased nine years ago.
"There were lots of people wanting to move in there. They wanted to be near the beach and there weren't many places up for rent. The rent was definitely a lot higher back then."
But when Mr Meredith’s unit on Dent Street fell vacant earlier this year, it was a different ball game. The weeks flew by and there was little interest.
"Every week it was on the market I was losing money," he said. "I decided to put a brand new kitchen in to get more people through it."
Eventually, Mr Meredith was able to secure tenants, but only after he had dropped the weekly rent from $420 to $340.
He attributed his difficulties to greater levels of supply, as low interest rates encouraged more renters to enter the housing market.
"When I jumped online and looked at how many places were available, you could see why I was having trouble," he said. “There were 20 other units available."
But the Leah Jay spokesperson said while a vacancy rate over four per cent might be problematic, anything between two and three per cent was "pretty standard".
"Whilst rents have remained steady over the past few years, this shouldn’t be a concern for investors," she said. "It is not unusual for vacancy rates to fluctuate around three per cent, this is the equilibrium and allows for the market demand and supply.”
The weak results were replicated in Newcastle’s unit market, and throughout other parts of the Hunter.
The median rent for a unit in the Newcastle local government area has increased from $330 to $350 since the beginning of 2015, compared to a statewide jump of $450 to $510.
The median rent for a detached house grew from $390 to $410 at Lake Macquarie and $368 to $390 at Maitland.
Port Stephens performed marginally better, with rents for houses climbing from $380 to a peak of $420 earlier this year, before sliding back down to $400 last quarter.
The Leah Jay spokesperson said a wave of new apartments coming into the mix in the next 12 months could also affect the dynamics.
“Quality tenants have a selection of properties to choose from and those properties with all the ‘mod cons’ in desirable suburbs will always see more interest if priced correctly,” she said.
“When rents start rising we’ll also see a rise in tenants deciding that rather than pay someone else’s mortgage, they’ll buy and pay off their own asset.”