The country has seen the steepest annual rental increase on record, at 14.6% for houses and 17.6% for units across the combined capitals.
House and unit rents are at record highs across all cities, apart from Darwin and units in Perth.
Across the combined capitals, the pace of quarterly growth has eased compared to earlier in 2022. This suggests the seasonal lift in supply is easing rental conditions marginally or an affordability ceiling is being reached by tenants.
While there has been a seasonal lift in the number of vacant rental properties, tenants will find that choice remains limited due to historically low vacancies for the month of December.
2022 has been a record-breaking year for the rental market, according to the latest Domain Rent Report.
Actually, this quarter, the rental market has become extraordinarily tight with tourism, overseas migration and foreign students placing greater pressure on supply as demand increases.
This continues to fuel the landlords’ market putting increased pressure on tenants in many parts of the country.
Interestingly, house and unit rents grew to new heights over the December quarter and saw their largest-ever annual increase across the combined capitals.
This is the longest stretch of continuous rental price growth as house rents rise for the seventh consecutive quarter and unit rents for the sixth.
Dr Nicola Powell, Domain’s Chief of Research and Economics commented:
"Nationally, asking rents are at historic highs across all cities (apart from Darwin and units in Perth), rents are rising at the fastest annual pace ever seen across the combined capitals and the number of vacant rental properties is at an all-time low for the month of December."
Sydney's record-breaking streak continued over the December quarter with unit rents reaching a new high at $575 per week.
In fact, for the first time since September 2020, Sydney is the most expensive city to rent a unit.
Sydney’s steepest growth in house rents since 2008 came to an abrupt halt over the December quarter, holding at a record high of $650 per week.
This has slowed the pace of annual growth for the first time in 18 months but remains high relative to previous years.
Meanwhile, Melbourne’s longest stretch of rental price growth in fifteen years (since 2007-08) for houses and units continued over the December quarter, marking the fifth consecutive quarter of rising rents.
Rent prices, quarterly and yearly change for units
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House rents hit another record high although Melbourne still remains the most affordable city in which to rent a house.
For the first time since March 2020, unit rents are at a new record high at $450 per week following the steepest quarterly and annual growth ever to be seen for the city.
As for the other capital cities, the report showed:
- Brisbane’s second-longest stretch of rising house rents stopped in the December quarter, holding steady at an all-time high of $550 per week. Unit rents continued the record-long stretch of rising rents following the sixth consecutive quarter of
- House rents are at a new record high but growth is slowing in Adelaide. This suggests an affordability ceiling is being reached as tenant budgets are unable to keep pace with house rents. Unit rents are steady at the record high achieved in the previous quarter at $400 per week.
- Perth’s house rents have risen sharply for the fifth successive quarter and have accelerated to provide the strongest quarterly outcome in two Unit rents have also increased over the quarter but the pace of growth has halved compared to the previous quarter.
- House rents have rebounded in Canberra after reversing all of the previous quarter Canberra remains Australia’s most expensive city in which to rent a house. However, rental growth continues to slow with the annual pace at its lowest in two years.
- The stability in Hobart’s rental market last quarter was short-lived, with house and unit rents rising over the December quarter to reach new record highs. Hobart is still in the midst of a rental crisis and is firmly in landlords’
- Darwin’s asking rents grew over the December quarter to reach the highest point since 2015 for houses and late 2014 for It is the only capital city to not reach record high house and unit rents in the last year.
As for the factors that affected the rental market's current state, Dr Powell said:
"There are many factors that have driven the rental market to its current state and there is no quick fix to ease its highly competitive nature.
The government’s commitment to building more housing is a great start but we need to see further progress and a change in land use and planning rules to allow for more homes to be built in middle-ring suburbs.
With the population increasing, rising investor activity is needed to assist with Australia’s limited rental market supply, advancements to the build-to-rent sector and more assistance from the government to help shift more tenants into home ownership.
Investors should be encouraged to participate in social, community and affordable government housing programs.
On top of that, seeing meaningful improvements in gross rental yields this quarter will hopefully encourage investor activity helping to address supply issues."
The future of Australia's rental market is likely to be shaped by a complex interplay of economic, social, and demographic factors.
Further, Dr Powell shared her insights:
"The highly competitive rental market that we saw last year is going to be amplified as Australia embarks on the busiest period in the rental calendar in January.
Due to a seasonal lift, those on the hunt for a new lease this quarter will find slightly more choice as the rental market moves into its busy changeover period at the start of the new year freeing up some homes for a short amount of time.
Amid Australia's cost of living crisis, we predict that units will be a popular option for those looking for a rental this year.
This suggests that budget-conscious tenants are making the shift from houses to units to suit their current budgets while still being close to work, school and amenities."