Surge in Australian Rental Rates Continues Amid Property Market Recovery; Prospects Dim for Renters

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The Australian property market has witnessed an accelerated recovery, with its pace reportedly four times faster in the June Quarter than the previous period, according to Domain. However, this booming recovery is delivering a raw deal to renters across the nation, with over 90% of suburbs reporting rent increases. The figures reflect a severe imbalance between rental supply and demand, with the issue accentuated by a rapid increase in overseas migration.

New data reveals that over nine in 10 suburbs across Australia have experienced rent hikes, a phenomenon causing consternation among renters. In many cases, the surge in rents has even hit double digits. CoreLogic’s Mapping the Market study reveals that unit renters are faring the worst, with two-thirds of unit suburbs recording a rise in rent of more than 10%, as reported by Rowan Crosby in his recent article.

CoreLogic economist, Kaytlin Ezzy, highlighted the ongoing shortage of rental listings as the principal driver of these increases. Higher interest rates have also played a role in dampening supply. “Investors tend to shy away from the housing market during negative economic shocks,” said Ezzy. “The sharp rise in interest rates has coincided with a 23.6% fall in new housing investment lending between April 2022 and May this year” (Crosby).

The rental market in Adelaide, Perth, and Regional Western Australia is under particular stress, with a 100% increase in both house and unit rents over the past 12 months. Renters in Perth are bearing the brunt of this situation, witnessing a staggering 13.4% rise in rents over the past 12 months and a 41.8% hike since March 2020.

The demand-supply imbalance is exacerbated by the fact that many overseas migrants, a significant number of whom rent in inner-city unit precincts, are adding to the rental demand. This has led to a swift rise in rents, and the upward trend is expected to continue, given the ongoing imbalance between demand and supply (Crosby).

Meanwhile, Canberra and Hobart provide a beacon of hope for renters, with these two capital cities being the only ones where rent listings are currently significantly above the previous five-year average. The rental pressure in Canberra has eased slightly, with 18 unit markets recording a decline in rents (Crosby).

In Sydney, unit rentals have been experiencing some of the country’s strongest growth, with a few minor exceptions in the city’s Central Coast region. Rent increases are particularly evident in the southwest of Sydney, in suburbs like Campsie and Belfield, which have been witnessing strong migration trends. Notably, units in Sydney’s inner-city market of Haymarket have seen the highest annual rise, soaring by 32.6%, equivalent to $276 per week.

Ezzy pointed out that while the property market recovery may slow down, offering an opening for renters ready to make a purchase, the conditions remain tight for those who aren’t ready to buy. As noted by SBS News, for many renters, the current market conditions still present significant challenges.

The present scenario brings to light the urgent need for measures that will address the rising rent issue and ensure that the benefits of the property market’s recovery extend to all stakeholders. As it stands, the increasing gap between rental demand and supply is raising serious concerns about housing affordability in Australia.

References:

Crosby, R. (2023). Australian rental market: Over 90% of suburbs hit by rent increases. https://thepropertytribune.com.au/market-insights/australian-rental-market-over-90-of-suburbs-hit-by-rent-increases/ 

SBS News. (2023). Australia’s property market gains momentum, but tight conditions for renters. https://www.sbs.com.au/news/video/australias-property-market-gains-momentum-but-tight-conditions-for-renters/mt6faen58