Australia’s rental market is tougher than ever, with sky-high prices and very low rental vacancy rates pushing us further into a rental crisis situation.
While rental price growth appears to have peaked, there is still growing concern that the supply of rental homes could worsen further as higher mortgage costs hit landlords and government interference makes property investment less attractive.
The current national vacancy rate sits at just 1.3%, with data varying wildly across the states, according to SQM data.
Major cities are bearing the brunt of the crisis, with Darwin, Perth and Adelaide suffering the lowest vacancy rates at 0.7%, 0.7% and 0.6% respectively, indicating a tight rental market in these locations.
Sydney's vacancy rate has remained relatively consistent over the past 3 months at 1.7%, while Melbourne's rate has risen to 1.6%.
Canberra recorded the highest rental vacancy rate of any state or territory at 2.1%
Meanwhile, Hobart showed a notable decline in vacancies, with the rate falling to 1.1% in August.
The total number of residential rental vacancies across Australia now stands at 39,665, marginally lower than the 39,701 vacancies recorded in July and 40,486 vacancies recorded in June 2024, but still above the 38,864 vacancies in July 2023.
The national median weekly asking rent sits at $692 for houses and $547 for units.
And while that might seem affordable for some, there are many suburbs where rental prices are significantly higher.
Australia's 50 priciest suburbs for renters
In fact, the top 30 of Australia’s top 50 most expensive suburbs to rent all have one thing in common:
They’re all located in Sydney.
And 16 of the top 20 most expensive suburbs are all nestled in Sydney’s affluent eastern suburbs.
According to the most recent data by CoreLogic, the Sydney harbourside suburb of Vaucluse is Australia’s most expensive place to rent a home with the median weekly rental costs sitting at a whopping $2,588.
It’s somewhat unsurprising though given that the median house price in the area comes in at just over $9 million.
Second and third on the list are also located in Sydney’s affluent eastern suburbs.
Bellevue Hill’s $2,240 median rent gives a 1.67% rental yield while Rose Bay’s $2,174 median rent gives a slightly higher 1.83% rental yield.
Meanwhile, Double Bay, Dover Heights, and Bronte all have a median rent between $1,962 and $2,078 and are all also located in Sydney’s eastern suburbs.
Meanwhile, over on the north shore, renters in Mosman (which is 7th on the list) can expect to pay $1,921 per week in rent.
Here’s the full list:
| Rank | Suburb | State | Median rent (per week) | Gross rental yield (%) | Vacancy rate (%) | Annual change (%) |
|---|---|---|---|---|---|---|
| 1 | Vaucluse | NSW | $2,588 | 1.67 | 4.80 | 10.90 |
| 2 | Bellevue Hill | NSW | $2,240 | 1.43 | 3.20 | 12.40 |
| 3 | Rose Bay | NSW | $2,174 | 1.83 | 2.00 | 9.90 |
| 4 | Double Bay | NSW | $2,078 | 1.79 | 4.50 | 11.10 |
| 5 | Dover Heights | NSW | $1,994 | 1.87 | 3.60 | 6.00 |
| 6 | Bronte | NSW | $1,962 | 2.07 | 2.90 | 14.70 |
| 7 | Mosman | NSW | $1,921 | 1.87 | 2.50 | 3.90 |
| 8 | Clovelly | NSW | $1,918 | 2.44 | 0.60 | 17.10 |
| 9 | Woollahra | NSW | $1,890 | 2.00 | 4.00 | 6.30 |
| 10 | North Bondi | NSW | $1,888 | 2.23 | 1.50 | 17.00 |
| 11 | Bondi | NSW | $1,846 | 2.32 | 0.70 | 19.50 |
| 12 | Clontarf | NSW | $1,784 | 2.06 | 2.20 | 5.60 |
| 13 | Balgowlah Heights | NSW | $1,773 | 2.27 | n/a | 12.40 |
| 14 | Queens Park | NSW | $1,767 | 2.32 | 1.40 | 13.20 |
| 15 | Coogee | NSW | $1,765 | 2.48 | 2.40 | 24.20 |
| 16 | South Coogee | NSW | $1,752 | 2.55 | 1.70 | 26.80 |
| 17 | Waverly | NSW | $1,674 | 2.33 | 1.30 | 2.90 |
| 18 | Paddington | NSW | $1,652 | 2.48 | 1.50 | 9.30 |
| 19 | Bondi Junction | NSW | $1,618 | 2.78 | 1.70 | 13.90 |
| 20 | Seaforth | NSW | $1,613 | 2.39 | 2.40 | 6.60 |
| 21 | Fairlight | NSW | $1,597 | 2.21 | 0.50 | 7.50 |
| 22 | North Bridge | NSW | $1,589 | 1.73 | 4.20 | 0.50 |
| 23 | Castlecrag | NSW | $1,501 | 1.77 | 3.80 | -0.70 |
| 24 | Longueville | NSW | $1,501 | 1.56 | 1.40 | -2.10 |
| 25 | Randwick | NSW | $1,498 | 2.45 | 0.90 | 22.70 |
| 26 | Castle Cove | NSW | $1,498 | 1.92 | 2.20 | 0.30 |
| 27 | North Curl Curl | NSW | $1,496 | 2.31 | n/a | 15.00 |
| 28 | Burraneer | NSW | $1,482 | 2.34 | 3.00 | 21.20 |
| 29 | Balgowlah | NSW | $1,479 | 2.38 | 1.00 | 8.60 |
| 30 | Curl Curl | NSW | $1,444 | 2.05 | 3.40 | 12.50 |
| 31 | Brighton | VIC | $1,361 | 1.93 | 1.60 | 5.90 |
| 32 | Mount Claremont | WA | $1,308 | 3.47 | 0.90 | 11.60 |
| 33 | Dalkeith | WA | $1,285 | 2.17 | 1.30 | 5.80 |
| 34 | Black Rock | VIC | $1,213 | 2.57 | 2.20 | 5.60 |
| 35 | City Beach | WA | $1,212 | 2.49 | 1.30 | 5.80 |
| 36 | Cottesloe | WA | $1,210 | 2.49 | 1.10 | 10.00 |
| 37 | Malvern | VIC | $1,198 | 1.88 | 1.30 | 3.40 |
| 38 | Swanbourne | WA | $1,193 | 3.15 | 0.40 | 7.90 |
| 39 | Mosman Park | WA | $1,169 | 3.11 | 1.30 | 10.20 |
| 40 | Bulimba | QLD | $1,164 | 3.07 | 1.90 | 7.60 |
| 41 | Canterbury | VIC | $1,141 | 1.84 | 1.30 | 14.40 |
| 42 | East Melbourne | VIC | $1,136 | 2.35 | 2.60 | 12.60 |
| 43 | Brighton East | VIC | $1,127 | 2.35 | 1.30 | 9.40 |
| 44 | Hamilton | QLD | $1,120 | 2.35 | 1.70 | 3.00 |
| 45 | Hawthorne | QLD | $1,119 | 2.78 | 2.10 | 7.00 |
| 46 | Sandringham | VIC | $1,117 | 2.56 | 0.60 | 3.70 |
| 47 | Middle Park | VIC | $1,116 | 2.18 | 0.90 | 7.40 |
| 48 | Hampton | VIC | $1,104 | 2.32 | 1.40 | 3.30 |
| 49 | Claremont | WA | $1,103 | 3.11 | 0.30 | 10.30 |
| 50 | Kew | VIC | $1,097 | 2.00 | 1.20 | 3.30 |
Source: CoreLogic
Outside of Sydney, Melbourne’s bayside Brighton is the priciest capital city suburb with a median weekly rent of $1,361.
Close behind is Mount Claremont, which is Perth’s most expensive rental suburb, with a $1,308 per week median rent.
Bulimba is the most expensive suburb for rental properties in Brisbane, with a median of $1,164 per week rent.
Rental costs: How do our Aussie cities stack up?
Sydney might dominate the list of the top 30 most expensive suburbs for renting a property, but across city averages, the other city capitals are close behind.
Sydney’s elusive suburbs drag the city’s median rental price for all dwellings up to $830 per week but Perth isn’t far behind with its $710 per week median, SQM research shows.
Canberra and Brisbane come in third and fourth place with $656 per week and $655 per week respectively.
Melbourne is next, with a median rental price of $636, followed by Adelaide, which has a median rental price of $609 per week.
Darwin and Hobart are the most affordable areas to rent, with a city median of $598 and $502 respectively.
And in terms of the strongest-performing rental market among the capitals over the 12 months to September 2024, the data differs again.
Note: Interestingly, despite being a more affordable suburb to rent, Adelaide was the strongest performer with combined weekly rent rising 13.7% over the 12-month period and 2.8% over the quarter.
Perth enjoyed a 9.9% increase in its combined weekly rent over the 12-month period, followed by Melbourne with a 6.8% increase in its rental rate over the same period.
While there were no declines in the year-on-year data, Canberra recorded the lowest annual increase in rental prices at 1.3%.
Quarter-on-quarter data indicate that prices may be slowing, however, with Canberra and Hobart data flat for the 3-month period and declines in rental prices seen in Sydney, Brisbane and Perth at -1.7%, 0.7% and 0.7%.
Has rental growth reached its peak?
Tim Lawless, CoreLogic executive research director recently said that the annual pace of rental growth peaked at 9.7% over the 12 months ending November 2021, which was a series high.
The annual growth trend has since eased back to 7.2%, the lowest annual growth rate since the 12 months ending May 2021.
Despite the slowdown in annual rental growth, most cities are still recording an annual rental trend that is well above the pre-COVID average.
Nationally, rents were rising at the average annual pace of just 2.0% per annum in the ten years before March 2020.
The only capital where the annual change in rents has been less than the pre-COVID decade average is Hobart where both housing values and rental trends have been weak.
What has caused the slowdown in rents?
Lawless explained that there are several factors at play when it comes to slower rental conditions.
1. Affordability
Affordability is likely to be a key factor constraining further rental growth.
Between March 2020 and June 2024, Australian wages (based on the wage price index) increased by 12.7% while rents have increased by 36.1%.
According to CoreLogic’s latest rental affordability metrics, a household on the median income would be dedicating 32.2% of their gross annual income to pay the median rent, a record high on the series that goes back 20 years.
2. Household formation is shifting
With rental affordability so stretched, patterns of household formation are once again evolving.
Data from the RBA shows the average capital city household reduced in size from around 2.63 residents per dwelling to around 2.53, as group households split during the pandemic.
Smaller households had the effect of amplifying housing demand, especially rental demand.
While this trend has been slow to reverse, the RBA’s latest estimates show households are once again becoming larger.
As group households and multi-generational households become more common and the average household size rebuilds, logically rental demand should ease, Lawless explained.
3. Overseas migration peaked
The peak in net overseas migration in the first quarter of 2023 aligns with the peak rate of rental growth across the unit sector in April 2023.
Since net overseas migration peaked at a record high of 165,000 in the March quarter last year, the quarterly change reduced to 107,000 in the December quarter of 2023; a drop of around 58,000 net overseas migrants to Australia.
While net overseas migration was still about 1.6 times higher than the pre-COVID decade average for the December quarter, it’s a sharp drop from the record high levels of migration.
Overseas arrivals data points to an ongoing slowdown in foreign student arrivals, implying the net overseas migration slowdown has further to go.
With approximately 90% of net migration to Australia arriving on temporary visas, the flow through to rental demand is direct and immediate.
Less migration helps to explain a further reduction in rental demand.
4. Building completions and government programs increased supply
Peripheral factors in the rental slowdown could include the ongoing completion of new dwellings related to the HomeBuilder program and a pickup in investment activity supporting rental supply.
The HomeBuilder grant, which was available between June 2020 and mid-April 2021 saw a surge in dwelling approvals, with commencements subsequently peaking in the June quarter of 2021 at 66,400.
Materials shortages, capacity constraints and cost blowouts have seen a significant lag in delivering this stock through to completion and have likely resulted in a prolonged period of renting for many of those waiting for their new home to be completed.
As more new builds settle, we should see a gradual diminishment in rental demand associated with building delays.
5. Investors are returning to the market
Investor activity has been on the rise, with the volume of lending to investors rising 10.7% over the year to June and the value of lending rising 30.2%.
Investors play a key role in delivering rental supply to the market which may be supporting an alleviation in supply-side pressures, he explained.
Tips: As an investor, it's important to remember that while you can look forward to rising rental returns, an investor’s future income will be dependent upon their tenants' ability to keep paying higher rent over the years.
After all…your future income will be dependent upon your tenants’ ability to pay you increasing rent over time.
That’s why it’s important to own properties in the right suburbs - those where the tenants will be able to afford higher rents over time rather than suburbs where the tenants are only a week or two away from going broke.
In general, these will be locations where tenants are aspirational and have a good income, and are likely to have increasing income over time so they can pay you more rent.
