A chronic shortage of rental properties across Australia has reignited growth in weekly rents and further tightened already low vacancy rates.
CoreLogic’s Quarterly Rental Review for the March quarter shows that after easing throughout the second half of 2022, the national rental index climbed 2.5 per cent in March quarter, up from 2 per cent in the December quarter.
Vacancy rates also tightened to a new record low of 1.1 per cent in the first quarter of 2023.
More recent figures also don’t bode well for tenants, with national rental listing volumes falling to just under 95,000 in the four weeks to April 2.
This is 17.3 per cent below the levels recorded at the same time last year and 36.3 per cent below the previous five-year average.
“The reacceleration of Australia’s rental market won’t be welcome news for those tenants already struggling to find affordable accommodation in our capital cities,” CoreLogic Economist Kaytlin Ezzy said.
“There’s already a chronic undersupply of advertised rental stock in many parts of the country that’s translated into record low vacancy rates across most capitals.
“Such a low number of available rentals is a key factor that pushed rental values higher again last quarter.”
Ms Ezzy said while the annual growth trendin rental rates is steady, it is still stubbornly high at 10.1 per cent for the 12 months to March, which equates to an extra $52 per week for tenants.
Increased overseas migration has also seen the national vacancy rate tighten again to 1.1 per cent in March, down from 1.3 per cent in December.
The vacancy rate across the combined capitals dropped to a record low 0.9 per cent in March, while in regional Australia it climbed to 1.4 per cent.
“The uptick in rental growth can be attributed to surging rents in the unit market, particularly across the largest capitals, with increased demand from overseas migration occurring amid a shortage of rental supply pushing rents higher,” Ms Ezzy said.
At a national level, unit rents rose 3.9 per cent over the quarter, up from 2.8 per cent in the December quarter.
National house rents recorded a smaller increase, from 1.7 per cent to 2 per cent, with affordability pressures likely pushing more renters towards the medium to high-density sector.
“Rental growth conditions across the capitals were likewise skewed towards the medium to high density sector, with each city recording a larger quarterly and annual increase in unit rents compared to houses.”
Rental growth across the combined capitals outpaced the combined regional markets, continuing the trend seen since June 2022.
Over the three months to March, combined capital city rents rose 3 per cent, which is more than twice the pace of the combined regionals where rents climbed 1.2 per cent.
“While the return of overseas migration has contributed to the capital city rental trend reacceleration, stronger growth through the earlier stages of COVID has seen regional rents rise by 28.2 per cent since the onset of COVID in March 2020, while capital city rents have risen by 23 per cent,” Ms Ezzy said.
The largest quarterly rental increases were recorded in Melbourne (3.7 per cent), Perth (3.6 per cent), Sydney (3.4 per cent), Hobart (1.8 per cent) and Adelaide (1.7 per cent).
Brisbane recorded an easing in rental growth, from 2.2 per cent in December to 1.8 per cent in March, while Darwin and Canberra (-0.7%) were the only capitals to record falls of 1 per cent and 0.7 per cent respectively.
Despite recording the largest quarterly rental increase, Melbourne remained the country’s most affordable capital, with a median rental value of $526 per week.
“Weaker rental demand due to extended lockdowns and closed international borders saw Melbourne’s relative rental affordability improve through the first two years of COVID,” Ms Ezzy said.
“However, since overseas migrants and international students had returned and they typically choose to rent in Melbourne or Sydney, the pendulum had swung the other way. This trend has seen the gap between Melbourne and the second most affordable rental capital, Adelaide ($531), narrow from $15 per week in December to just $5 per week in March.”
Sydney is the most expensive capital to rent in with a median rent of $699 per week, followed by Canberra at $674 per week.
Sydney’s quarterly rental trend gained momentum, from 2.8 per cent over the December quarter to 3.4 per cent in March, the highest quarterly rise since the three months to April 2010 and its highest annual increase (12.6%) since CoreLogic records began in 2006.
Perth recorded the strongest annual increase in rents across the capitals, up 12.8 per cent over the 12 months to March, equivalent to $65 per week, followed by Sydney (12.6 per cent) and Brisbane (12.3 per cent).
Canberra recorded the smallest annual rent increase, up just 0.3 per cent, while Darwin and Hobart recorded annual increases of 4.6 per cent and 4.7 per cent respectively.
Each of the broad rest-of-state regions saw rents rise over the quarter, although the rate of increase varied.
Regional SA recorded the largest rent rise over the three months to March, up 2.3 per cent, followed by regional WA (up 2.2 per cent), regional QLD (up 1.4 per cent) and regional Victoria (up 1.2 per cent).
Regional Tasmania recorded the smallest increase, up just 0.1 per cent, while regional NSW and regional NT rents rose 0.7 per cent and 0.9 per cent respectively.
