In the past year, rents have increased for almost three-quarters of rental properties, up from about one-quarter each year pre-pandemic, according to a new report built on data from MRI Software.
The joint report from the Australian Bureau of Statistics (ABS) and the Reserve Bank of Australia (RBA), titled New Insights into the Rental Market, also revealed that rental prices at properties with new tenants were more likely to change than for properties with existing tenants.
During the pandemic, particularly in mid-to-late 2020, new tenants paid rental prices lower than or equal to what was being paid for a given rental property the year prior, but since mid-2021, most new tenants have paid higher rent than what was charged for the same property the year before.
“Rent increases for properties with a new tenant have tended to be larger, on average, than for properties with existing tenants,” the report noted.
“In February 2023, over 60 per cent of properties with new tenants had rent amounts more than 10 per cent higher than 12 months earlier; this compares with only one-quarter of properties with existing tenants having rent increases of more than 10 per cent.”
In February this year, the median weekly rent was highest in the ACT at $560 per week, while South Australia was the cheapest at $380 per week.
The report is based on data from MRI Property Tree, which goes back as far as July 2018 and currently includes about 600,000 rental properties across regional and capital city areas, representing 32 per cent of the national 2021 Census rental dwelling stock.
The dataset contains information on weekly rent, property characteristics, postcode, number of bedrooms and lease start and end dates.
MRI Software Asia Pacific Director of Strategy Josh Symons said the proptech was pleased to join forces with the ABS and the RBA to provide a more holistic picture of the Australian rental market.
“People thrive in well-connected communities, and we have these datasets that we can anonymise to protect the interests of our clients, and their clients, but also support these significant economic and government regulatory bodies to derive information and help people make sound decisions,” he said.
“And for us, getting this report out there is another tool for our clients and the industry to use to better support those conversations with tenants and landlords.”
Mr Symons said one of the key differences the MRI Property Tree numbers provided was actual rent data as opposed to advertised rent.
“The ABS working with MRI has allowed them to get data which has supported their endeavours to calculate rentals inflation and include this in the basket of goods for CPI.” he said.
This time around, the report showed that since the onset of the pandemic in 2020, new tenant rents have increased by 24 per cent, compared to the CoreLogic advertised rent series, which showed rents had risen 22 per cent.
“The rents paid by new tenants provide a leading indication of price developments in the total stock of rental properties,” the report noted.
“Previously, the best available indicator of rents paid by new tenants was advertised rents; however, this may not be the most useful measure because the actual rent agreed to by a landlord and a new tenant may be different from the advertised amount.
“Actual rents paid by new tenants increased by 14 per cent over the year to February 2023, which is 9 percentage points higher than the increase in the monthly CPI indicator rent index.”
Mr Symons said this provided numerical evidence, not just anecdotal evidence, rent bidding was occurring.
“This obviously equates to the fact that tenants are actually offering to pay higher rents than the advertised rent to secure the property,” Mr Symons said.
“That is part of the problem of what governments have been trying to solve.”
Mr Symons said the other key takeaways from the report were that the percentage of six-month leases had dropped and the number of 12-month leases had risen.
In February 2021, 16.5 per cent of leases were for six months, but that dropped to 11.4 per cent in February 2023.
In December 2020, the percentage of leases that were for six months sat at 66 per cent, and in February this year, that number had risen to 73.5 per cent.
“Because rental inflation is growing significantly, people are obviously looking to stay longer, and more people are signing 12-month leases than six-month leases, so they can get financial security for at least a 12-month period,” Mr Symons said.
Another key trend to come from the report is that rents for apartments with new tenants have
been more volatile than for houses and townhouses.
“Rent inflation for apartments with new tenants was 24 per cent over the year to February 2023, whereas the overall index increased by 14 per cent,” the report said.
