Record immigration and tight supply have seen rents across the country continue to rise, however, some cities are now starting to see falls, as a multi-speed market develops.
According to Domain, Sydney is Australia’s most expensive city to rent a house and unit for the first time since 2018,
Sydney house rents increased 6.1 per cent to $700 per week in the past quarter, while units jumped 8.1 per cent to $670 per week.
Perth recorded the second largest increase in house rents with a 5.5 per cent rise for the quarter, while in the unit market, Perth (6.7 per cent) and Brisbane (6 per cent) and recording steep rises.
Nationally, capital city houses saw rents increase 2.7 per cent and 11.5 per cent over the past 12 months, while units have increased 5.5 per cent for the quarter and a staggering 26.1 per cent in the past year.
At this stage, there is a multi-speed housing market developing, with some capital cities now seeing rents declining sharply.
For houses, rents in Hobart declined 3.6 per cent, Canberra fell 2.2 per cent and Darwin remained flat.
Hobart units saw the largest decline at 6.3 per cent, while Darwin fell 1 per cent and Canberra remained flat over the quarter.
Domain’s Chief of Research and Economics, Dr Nicola Powell, said the colliding mismatch of heightened demand and supply side constraints has continued to place pressure on house and unit asking rents across Australia.
“This has resulted in records being set in most capital cities, including the longest stretch of continuous rental price growth on record for Melbourne house and unit rents, together with houses in Adelaide and units in Sydney and Brisbane,” Dr Powell said.
“The only capital cities bucking the trend of quarterly price growth are Canberra and Hobart for both units and houses, and Darwin for units.”
“Key factors contributing to a tight rental market include the quicker-than-expected return of international students, the revival of overseas migration, as well as tenants opting to rent for longer due to financial barriers to home ownership.”
Slowing growth
According to CoreLogic, while on a national level, rents increased 2.5 per cent for the quarter, the pace of rental growth was starting to ease.
This was the same rate of growth as the previous quarter, and lower than the 2.8 per cent increase seen over the three months to May.
CoreLogic Economist Kaytlin Ezzy said while a slowdown in the pace of national rental growth is now evident across the monthly, quarterly and annual trends, rental growth remains well above average.
“The slowdown in national rental appreciation can also be seen in the annual trend, with national rents rising 9.7 per cent, over the 2022-23 financial year, down from the record 10.2 per cent lift seen over the 2022 calendar year,” Ms Ezzy said.
“The softening in rental growth occurred in spite of an ongoing surge in overseas migration and a continued shortage in rental supply, suggesting an increasing portion of tenants are reaching their affordability ceiling
“While rental demand from overseas migrants is likely to remain strong for some time yet, particularly across the largest capitals, we’ve already seen a reduction in domestic rental demand via an increase in the average household size.”
With national rents 27.4 per cent higher since the onset of COVID, equivalent to a $127 per week increase on the median dwelling rent in Australia, Ms Ezzy said it’s likely there will be an increase in average household sizes as more renters re-form share houses as a means of sharing the increased rental burden.
According to Ms Ezzy, rental listings remain well below the previous five-year average, with a national shortfall of about 32.4 per cent or 47,500 rental listings recorded over the four weeks to June 3.
Despite the continued shortage in listings, national vacancy rates eased slightly over the quarter, from 1.1 per cent in March, to 1.2 per cent in June, but remain well below the pre-COVID decade average (3.3 per cent).
