A rent report for the March quarter highlights that Australia’s rental market continues to remain firmly locked in favour of landlords as rising demand and low supply create challenging conditions for tenants in 2023.
“Across the combined capitals, we’re now seeing the longest stretch of continuous rental price growth on record as house rents rise for the eighth quarter in a row and unit rents rise for the seventh,” said Dr Nicola Powell, Chief of Research and Economics at property website Domain.
“For the first time since 2009 all capital cities have record house rents, highlighting the rental crisis the country is currently going through.”
Record rents are spanning almost all metropolitan areas (except unit rents in Canberra and Darwin) with house rents surging by $135 a week and unit rents by $140 across the combined capital cities since the pandemic low. Units are seeing a solid acceleration in rental growth, particularly in Sydney and Melbourne, while increases in house rents have lost pace across the combined capitals. This shift is fueled by ongoing affordability concerns pushing budget-conscious tenants into units. The demand hasn’t shown any signs of stopping, due to the influx of overseas migrants, international students, and temporary visa holder numbers.
“The return of international travel in 2021 and 2022 saw Australia’s net overseas migration gain hit almost 304,000 new people in the 12 months to September 2022, providing a significant boost of population gain for Australia,” added Powell.
“The proportion of overseas migrant arrivals that were temporary visa holders is now sitting at 61% – a substantial driver of rental demand. The impact of migration was further highlighted following the announcement from China’s Ministry of Education to stop acknowledging degrees gained online in January. This saw the number of rental searches on Domain from China jump 124% over the March quarter compared to last year. With more demand for rentals and not enough supply, renters will continue to face limited choices and tough competition, particularly for cities that traditionally see a higher intake of residents from overseas like Sydney and Melbourne.”
Despite Australia remaining a landlords market with the number of vacant rentals at an all-time low for the month of March, some tenants will find rental supply has begun to lift marginally. The vacancy rate across the combined capitals is marginally higher than last month’s record low (0.8%).
“Now that we’re out of the busy seasonal change-over period and tenants have settled into homes, we’ve seen that vacancy rates have slightly improved from the record low of 0.7% to 0.8%,” Powell said. “This provides a glimmer of hope that the crisis situation is easing. In fact, Sydney and Melbourne are the only cities to have a record low vacancy rate in March.“
Looking across the capital cities:
● The stability in Sydney house rents was short-lived, with rents rising again over the March quarter to hit a new record high with houses at $660 per week and units at $620 per week. Sydney units are experiencing an acceleration in rental growth while increases in house rents have lost pace annually.
● Melbourne house and unit rents rose for the sixth quarter in a row matching the longest stretch of rental price growth period which was achieved in 2007-08. House rental growth has accelerated to the fastest quarterly rise in six years and the steepest annual increase since 2008. Although house rents are hitting a record high, Melbourne still remains the most affordable city to rent a house, as other cities have seen more substantial growth.
● Brisbane’s house rents are at record levels but the annual outcome is the weakest since September 2021, suggesting that the steep increase in house rents is easing. Units continue the record-long stretch of rising rents following the seventh quarter in a row of growth.
● Adelaide houses continue the record-long stretch of rising rents following the eleventh consecutive quarter of growth to produce the fastest annual rise since 2005. Unit rents are rising faster than houses as affordability impacts tenants. ● Canberra house rents held steady over the March quarter at a record high to remain Australia’s most expensive city in which to rent a house. Unit rents fell for the first time since mid-2020, reversing the previous quarter’s growth. Rental choice has risen significantly over the past year to lift the vacancy rate and alleviate the current pressurised rental conditions.
● Perth’s house rents have risen for the sixth consecutive quarter reaching record levels. Unit rental growth doubled compared to the last quarter pushing unit rents to a record high for the first time since 2013.
● Hobart house rents bucked the national trend to become one of two capital cities to flatline over the March quarter to hold at last quarter’s record high. Unit rents lifted to another record high, but the pace of quarterly growth has halved compared to the previous quarter.
● Darwin house rents surged over the March quarter, doubling the previous quarter’s pace of growth. Asking rents for units are now only $30 lower than the 2014 record high.
“With many factors to consider, we need to see a massive change to strike the right balance between tenants and landlords,” concluded Powell.
“No single solution can fix this rental crisis as it’s a compounding issue of the high cost of housing, insufficient investor activity, and the lack of social and affordable housing. Rising investor activity is needed, the build-to-rent sector advanced, additional rental assistance provided for low-income households, more social housing and assisting tenants transition to homeowners.”
Methodology
Asking rents are based on the median weekly rental price advertised for houses and units. Gross rental yields are the average gross amount of rent received for properties against their respective price for houses and units. Quarterly house and unit rent (or gross rental yield) growth are calculated by comparing the median asking rent (or gross rental yield) of all houses and units advertised for rent from the immediate preceding quarter to the previous quarter. Annual house and unit rent (or gross rental yield) growth are calculated by comparing the median asking rent (or gross rental yield) of all houses and units advertised for rent from the immediate preceding quarter to the corresponding period the year prior. The change is calculated as a percentage difference. The median asking rent and gross rental yields are based on a minimum of 30 data points. Capital cities and SA4 areas are aggregated using 3 months of data. SA3 and LGA areas are aggregated using 6 months of data. Suburbs use 12 months of data. The March quarter includes data from January, February and March 2023.
