Since the pandemic's onset, finding a rental in Australia has become as challenging as snagging a seat at the AFL Grand Final.
Rental availability has plunged by half, and rents in our capital cities have rocketed by a staggering 33% in just two years.
Though the national vacancy rate nudged up slightly to 1.12% in December from October's record low according to the latest Proptrack figures, it’s still a far cry from the 2-3% we’d call a balanced market where supply meets demand.
This scarcity is a headache for tenants who are now grappling with a highly competitive market.
We’ve written a lot about the factors that led to these extremely tough conditions including the trend towards living in smaller households, a rebound in population growth, a shortfall in new housing construction, and a slowdown in dwelling completions, not to mention investors cashing in and selling up their properties.
As expected rents have climbed a steep hill.
The national median advertised weekly rents have ballooned 38.1% post-pandemic, with regional WA taking the lead, followed closely by Perth and regional Queensland.
As 2023 wound down, renters saw a hint of relief with a slight uptick in vacancies, yet the year was marked by persistent tightness that saw rents in our major cities—Sydney, Melbourne, and Perth—soar.
Melbourne led the charge in 2023, with vacancies shrinking more than anywhere else, with Sydney and regional Queensland not far behind. Meanwhile, Brisbane, Adelaide, and Perth are all sitting below the 1% vacancy rate, with Adelaide and Perth in particular at critically low levels of rental stock, though even there, we’ve seen a marginal ease.
Looking Ahead to 2024
Renters can draw a cautious breath of optimism for 2024, with signs pointing to a slowdown in rental price hikes.
The extraordinary rise in rental costs is showing signs of fatigue, with a growth of 11.5% in 2023, down from 15.6% in 2022.
In the combined capitals, rents jumped 13.2% to an average of $600 by December 2023—intense, yet a notch down from the 17.8% leap in 2022.
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In regional areas, there's a greater sense of stability with rents holding steady at $500 for two quarters straight, and the annual growth rate cooling to 4.2% in 2023 from 11.6% in 2022. But let’s not gloss over the fact that regional rents are still 37.0% higher than pre-pandemic levels.
This imbalance between demand and supply has put pressure on renters, with many dedicating a larger slice of their income to keep a roof over their heads.
And of course properties for rent are flying off the market at unprecedented speeds, and the competition is fierce.
The critical fix is, without a doubt, boosting rental supply.
While no significant surge in rental availability is on the horizon, we're beginning to see the pressure valves release slightly.
Household sizes are creeping up, driving a push towards shared housing as budget strains mount.
Migration rates are still high but are decelerating from the frenetic pace of 2023, and the rental property drought coupled with brisk rent hikes is luring more investors back into the market.
Despite a consistent flow of investor properties being put up for sale, the tide is shifting, with a slowdown in sales and a rise in rental listings.
Investor activity is also picking up steam. At Metropole we're receiving a large number of enquiries from new and returning investors keen to take advantage of the window of opportunity the current marker presents.
But clearly these shifts won't translate to an instant fix.
The number of vacant properties isn't going to skyrocket anytime soon, and the rental market will remain a battleground for a while yet.
And rents are going to continue to rise strongly in 2024.